EXCHANGE 


31 


Shall  We  Classify 
Property  for  Taxation 


The  Public  rely  upon  the  County 
Auditor  for  information  on  taxation  mat- 
ters. To  meet  this  demand  on  the  pend- 
ing amendment  to  the  constitution  for 
the  classification  of  property,  the  Auditor 
has  prepared  and  submits  the  within 
data,  setting  forth  its  advantages  and 
disadvantages. 


JOHN  A.   ZANGERLK 

COUNTY   AUDITOR 


"Untaxed  Wealth  of  Cleveland" 
"Rules  and  Principles  of  Land  Assessments" 

By  John  Jl.  Zangerle,  County  Auditor 

What  they  say: 

FRANKLIN  COUNTY,  OHIO 
Office  of  the  Auditor 

Columbus,  April  18,  1918. 
John  A.  Zangerle, 

Cleveland,  Ohio. 
My  Dear  Mr.  Zangerle: — 

I  am  not  directly  associated  at  present  with  the  real  estate  reappraise- 
ment  in  this  county  but  I  am  a  Deputy  Auditor  in  the  Taxing  Department  and 
am  trying  to  familiarize  myself  with  the  kind  of  an  appraisement  made  by 
Auditor  Zangerle  in  1917.  I  have  made  a  caroful  study  of  this  exceptional 
pamphlet,  published  by  the  Taxing  Department  of  Cuyahoga  County,  and  find 
It  the  most  thorough  book  upon  the  subject  it  ha*  been  my  pleasure  to  peruse. 
*  »  * 

Sincerelj'  yours, 

ROBERT  J.   BEATTY. 


DETROIT  REAL  ESTATE  BOARD 
Board  Rooms,  348  Penobscot  Bldg. 

March  25,  1918. 
Mr.  John  A.  Zangerle, 
County  Auditor, 

Cleveland,    Ohio. 
Dear  Sir: — 

We  ha.ve  just  been  privileged  to  see  a  copy  of  your  issue  of  "Rules  and 
Principles  with  Land  and  Building  Values  controlling  1917  Community  As- 
sessments, Cleveland." 

We  find  in  this  publication  a  mass  of  very  valuable  information  and  should, 
indeed,  be  very  glad  to  add  a  couple  copies  of  this  to  our  Board  Library.  If 
we  are  not  out  of  place  in  doing  so,  may  we  be  privileged  to  invite  you  to 
furnish  us  two  copies  for  that  purpose. 

Assuring  you   that   we   shall  be   glad  to  reciprocate  at  any  time,  we  ar<\ 

Yours  very  truly, 

DETROIT  REAL  ESTATE  BOARD, 
H.    T.   CLOUGH, 
HTC*B  Executive  Secretary. 


MINNEAPOLIS  REAL  ESTATE  BOARD 
835  Palace  Building 

March    20, 
Stanley  L.  McMichael,  Secy., 

Cleveland  Real  Estate  Board, 

717  Williamson  Bldg., 
Dear  Sir: — 

I  am  bothering  you  a  good  deal  lately  but  Cleveland  is  such  a  live,  pro- 
gressive city  and  Ohio  is  such  an  active  state  that  we  are  constantly  compelled 
to  ask  you  for  information  about  the  things  that  are  being  done  in  your 
community. 

Your  County  Auditor,  John  A.  Zangerle,  has  issued  a  land  value  map 
called  "Rules  and  Principles  with  Land  and  Building  Values  Controlling  the 
1917  Assessments  of  Cuyahoga  County."  We  have  seen  a  copy  of  this  and 
consider  it  such  a  fine  piece  of  work  that  we  would,  if  possible,  like  to  obtain 
five  copies  of  it,  one  for  each  member  of  our  Valuation  Committee.  Perhaps 
you  can  assist  us  in  obtaining  these  copies.  We  shall,  of  course,  insist  on 
paying  whatever  charges  may  be  necessary. 

Very  truly  yours, 

MINNEAPOLIS    REAL    ESTATE    BOARD, 
N*M  U.   U.  NELSON,  Secreta  >•>-. 


Shall  We  Classify  ~ 
Property  for  Taxation 


The  Public  rely  upon  the  County 
Auditor  for  information  on  taxation  mat- 
ters. To  meet  this  demand  on  the  pend- 
ing amendment  to  the  constitution  for 
the  classification  of  property,  the  Auditor 
has  prepared  and  submits  the  within 
data,  setting  forth  its  advantages  and 
disadvantages. 


JOHN  A.  ZANGERLE 

COUNTY    AUDITOR 


"Shall  we  Classify  Property  for  Taxation" 

By 
John  A.  Zangerle,  County  Auditor. 

The  State  of  Ohio,  from  the  adoption  of  its  first  Constitution 
has  relied  on  the  General  Property  Tax  for  raising  the  great  bulk 
of  state  and  local  revenue  until  about  four  years  ago  when  it 
practically  surrendered  this  as  a  means  of  securing  state  revenue, 
excepting  the  3/100  of  1%  or  3c  on  a  $100  assessment  for  highway 
purposes.  The  state  now  relies  mainly  upon  liquor  assessments 
and  corporation  excise  and  franchise  taxes  for  its  revenues,  while 
local  jurisdictions  rely  almost  entirely  on  the  general  property 
tax,  excepting  in  so-called  wet  counties,  embracing  for  the  most 
part  our  large  cities,  where  70%  of  the  liquor  assessments  help 
to  defray  local  expenses. 

This  general — or  so-called  "uniform" — property  tax  is  based 
on  the  theory  that  every  kind  of  property  regardless  of  character 
or  condition,  shall  be  taxed  in  proportion  to  value  and  by  uniform 
method  or  rate.  This  theory  presupposes  that  all  property  can 
bear  identical  burdens  and  also  that  all  kinds  of  property  are 
equally  easy  for  the  assessor  to  find  and  correctly  value.  That 
this  is  impossible,  even  with  the  very  best  and  most  efficient  ad- 
ministration in  the  United  States  in  Cuyahoga  County  is  evident, 
as  shown  by  the  Auditor's  "Untaxed  Wealth  of  Cleveland," 
recently  published.  (Sent  on  receipt  of  3c  postage). 

Of  the  necessity  for  a  reasonable  discrimination  in  the  rates 
of  taxation,  and  therefore  for  the  classification  of  such  property, 
Prof.  Bullock  of  Harvard  University,  speaks  in  the  following 
language : 

"Diversification  of  rates  of  taxation  agrees  with  the 
ordinary  business  principle  of  adjusting  charges  and 
prices  to  what  the  traffic  will  bear.  No  railroad  charges 
as  much  for  carrying  logs  as  for  carrying  furniture;  but 
the  discrimination  in  favor  of  logs,  by  enabling  that 
traffic  to  move,  contributes  to  the  revenue  of  the  road  and 
decreases  the  charges  upon  furniture  and  other  traffic  of 

3 

382630 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 


higher  grade.  ******  Reasonable  discrimination  be- 
tween the  objects  of  taxation  is  the  principle  upon  which 
our  customs  tariff  and  internal  taxes  upon  commodities 
are  now  adjusted.  We  tax  beer  at  one  rate,  spirits  at 
another,  and  tobacco  at  another,  and  no  sensible  man 
would  propose  to  tax  all  three  commodities  at  a  uniform 
rate.  Our  tariff  taxes  cut  diamonds  at  the  rate  of  10  per 
cent,  and  levies  upon  sugar  a  duty  equivalent  to  60  per 
cent  ad  valorem.  This  discrimination  is  both  just  and  ex- 
pedient, since  a  duty  of  60  per  cent  upon  diamonds  would 
lead  to  so  much  smuggling  as  to  produce  little  revenue ; 
while  the  duty  of  10  per  cent  yielded  in  1905,  $2,500,000. 
This  illustration  not  only  makes  clear  the  necessity 
of  adjusting  taxation  to  'what  the  traffic  will  bear/  but 
points  to  the  reason  therefor.  The  duty  of  10  per  cent  can 
be  collected  from  any  dealer  in  diamonds  because  the  gov- 
ernment succeeds  in  collecting  it  from  practically  all 
dealers.  If  the  duty  were  raised  to  60  per  cent,  and  a  few 
dishonest  dealers  were  tempted  to  evade  payment  of  it, 
the  honest  dealers  who  would  have  no  objection  to  paying 
duties  uniformly  collected  upon  all  persons  engaged  in 
their  trade  would  have  no  choice  but  to  resort  to  smug- 
gling or  go  out  of  business.  Evasion  of  taxation,  when  it 
becomes  general,  is  not  due  to  dishonesty  on  the  part  of 
the  average  taxpayer,  but  to  sheer  inability  of  the  honest 
man  to  pay  his  taxes  when  other  persons  succeed  in 
evading  theirs." 


PROPOSED  CLASSIFICATION  AMENDMENT 

Following  the  line  of  recent  action  of  several  states,  it  is  now 
proposed  to  amend  the  Constitution  so  that  property  of  different 
kinds  may  be  taxed  at  different  rates.  The  following  amendment 
to  the  Constitution  of  Ohio  will  be  submitted  to  the  voters  of 
Ohio  at  the  November,  1918,  election : 

The  General  Assembly  shall  provide  for  the  raising 
of  revenue  for  all  state  and  local  purposes  in  such  manner 
as  it  shall  deem  proper.  The  subjects  of  taxation  for  state 

4 


BY       JOHN       A.       ZA^GERLE,       COUNTY       AUDITOR 

and  local  purposes  shall  be  classified  and  the  rates  of~taxa- 

tion  shall  be  uniform  on  all  subjects  of  the  same  class  and 

shall  be  just  to  the  subjects  taxed. 

The  Auditor  of  Cuyahoga  County,  having  but  recently  laid 
down  a  program  favoring,  among  other  things,  the  classification 
of  property  as  a  temporary  and  partial  reform  to  secure  certain 
definite  results,  and  being  so  frequently  asked  his  opinion  on  the 
pending  amendment,  considers  that  a  printed  exposition  of  his 
attitude  will  save  a  great  deal  of  explanation  by  the  deputies  in 
the  Assessing  Department. 

While  the  amendment  may  not  allow  the  particular  reforms 
which  he  has  advocated,  such  as  a  mortgage  recording  tax  or  a 
horse-power  automobile  registration  tax,  and  while  it  will  per- 
mit the  legislature  to  impose  a  tax  on  deposits  in  bank,  and  an  in- 
vestment tax  on  stocks  and  bonds,  which  he  does  not  favor,  never- 
theless, the  amendment  will  give  the  legislature  such  additional 
broad  powers  as  will  allow  of  some  elasticity  in  the  treatment  of 
the  various  kinds  of  property,  and  will  produce  some  degree  of 
uniform  burden.  Above  all  it  will  throw  the  subject  into  the  forum 
of  earnest  discussion,  thereby  creating  and  forming  an  intelligent 
public  opinion  which  eventually  will  distinguish  as  to  the  in- 
cidence of  taxation  and  will  thereupon  crystalize  into  appropriate 
legislation. 

The  Constitution  of  Ohio  in  requiring  the  assessment  of  all 
property  at  its  full  value  at  a  uniform  rate  has  prevented  all, 
experimentation  in  this  field.  Notwithstanding  the  changed  in- 
dustrial and  commercial  conditions  in  Ohio,  no  change  has  been 
possible.  Many  persons  hesitate  to  vest  in  the  legislature  dis- 
cretionary powers  in  this  most  important  function  of  citizenship. 
And  yet  without  it,  no  relief  of  any  kind  is  possible,  although  the 
general  property  tax  is  almost  universally  condemned  as  im- 
possible of  uniformity. 


CONSTITUTIONAL   POWERS  IN   VARIOUS   STATES 

Not  all  states  have  been  as  short-sighted  in  the  granting  of 
power  to  the  legislature  nor  as  fearful  of  the  possible  abuse  of 
such  power  as  has  Ohio.  The  progressive  states  in  taxation  have 

5 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

reposed    complete    and    practically   unlimited    power    upon   their 
legislatures. 

New  York.  "The  legislature  shall  not  pass  a  private 
or  local  bill  in  any  of  the  following  cases  *  *  *  granting 
to  any  person,  firm  or  corporation  any  exemption  from 
taxation  on  real  or  personal  property."  Further,  "Every 
law  which  imposes,  continues  or  revives  a  tax  shall  dis- 
tinctly state  the  tax  and  the  object  to  which  it  is  to  be 
applied  and  it  shall  not  be  sufficient  to  refer  to  any  other 
law  to  fix  such  tax  or  object."  It  will  be  noticed  that 
there  is  no  restriction  whatsoever. 

Pennsylvania.  "All  taxes  shall  be  uniform  upon  the 
same  class  of  subjects  within  the  territorial  limits  of  the 
authority  levying  the  tax  and  shall  be  levied  and  collected 
under  general  laws." 

Michigan.  "The  legislature  shall  provide  by  law  a 
uniform  rate  of  taxation  except  on  property  paying  spe- 
cific taxes,  and  taxes  shall  be  levied  on  such  property  as 
shall  be  prescribed  by  law." 

"The  legislature  may  by  law  impose  specific  taxes 
which  shall  be  uniform  upon  the  class  upon  which  they 
operate." 

Minnesota.  "The  power  of  taxation  shall  never  be 
surrendered,  suspended  or  contracted  away.  Taxes  shall 
be  uniform  upon  the  same  class  of  subjects  and  shall  be 
levied  and  collected  for  public  purposes." 

Wisconsin.     "The  rule  of  taxation  shall  be  uniform 
and  taxes  shall  be  levied  upon  such  property  as  the  legis- 
lature shall  prescribe.     Taxes  may  also  be  assessed  on 
incomes  and  occupations,  which  taxes  may  be  graded  and 
progressive  and  reasonable  exemptions  may  be  provided." 
In  addition  to  the  above,   the   following  states   now  permit 
classification  of  property  by  the  legislature,  viz.,  Arizona,  Colo- 
rado, Connecticut,  Delaware,  Georgia,  Iowa,  Kentucky,  Maryland, 
New  Mexico,  North  Dakota,  Oklahoma,  Rhode  Island,  Vermont 
and  Virginia. 

6 


BY       JOHN        A.       ZANGERLE,        COUNTY        AUDITOR 


CLASSIFIED  SYSTEM  IS  MORE  EQUITABLE 

The  most  severe  indictment  against  the  general  property  tax 
is  that  it  makes  fish  of  one  and  fowl  of  another.  It  taxes  the  man 
with  a  conscience  and  permits  the  conscienceless  to  escape  as  the 
Auditor  clearly  shows  in  his  recent  pamphlet  "Untaxed  Wealth 
of  Cleveland.'"  It  taxes  our  visible  forms  of  property  while  the 
intangibles  largely  escape.  And  as  has  been  stated,  even  if  an 
attempt  were  made  to  scale  intangible  values  to  correspond  to 
real  property  values,  it  still  would  be  inequitable  to  tax  these 
values  in  precisely  the  same  way,  because  the  value  of  real  estate 
is  figured  and  sold,  ex-taxes,  so  to  speak,  while  taxes  must  be  paid 
out  of  the  income  of  intangible  property.  In  the  one  case  they 
are  excluded  while  in  the  other  they  are  included. 

The  mobility  of  intangible  wealth  should  also  be  considered, 
the  danger  of  driving  it  away  to  states  with  more  favorable  laws, 
unless  it  is  taxed  in  conformity  with  economic  principles  and  on 
a  basis  similar  to  adjacent  and  more  progressive  states. 

In  the  words  of  the  Mayor's  Advisory  Commission  on  ad- 
ministration of  the  tax  law  of  the  City  of  New  York  submitted 
to  the  Mayor  December  20th,  1917:  "As  for  the  attempt  to  tax  all 
personalty  at  the  real  estate  rate,  its  hopelessness  is  demonstrated 
every  day  and  everywhere.  Its  severity  condemns  it  to  failure. 
A  tax  that  would  absorb,  on  the  average,  from  thirty  to  fifty  per 
cent  of  income  is  too  close  to  confiscation  not  to  be  evaded  by  all 
honest  and  some  dishonest  means.  Securing  immunity  from  per- 
sonal taxation  is  almost  a  science  and  wealthy  corporations  and 
individuals  find  it  profitable  to  secure  expert  legal  advice  on  the 
subject." 

It  is  sufficient  to  state  that  economists  and  students  of  taxation 
and  administration,  with  very  few  exceptions,  all  agree  that  the 
general  property  tax  is  not  uniformly  enforcible  against  all  forms 
of  property.  Wherever  it  is  honestly  attempted,  it  makes  sneaks 
and  perjurers  of  thousands  of  people  and  creates  disrespect  for 
laws  generally  and  their  administration. 

Taxation  laws  must  be  respected  and  the  public  must  assist 
in  their  proper  administration.  This  may  only  be  expected  when 
the  taxation  laws  enjoy  universal  sanction.  Equity  in  the  im- 
position of  the  burden  and  the  power  to  uniformly  administer  is 

7 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

therefore  far  more  important  than  any  and  all  other  considerations 
— of  far  more  weight  even  than  the  amount  of  revenue  that  may 
be  obtained  thereby,  especially  when  such  possible  loss  of  revenue 
may  be  recouped  through  another  and  better  form  of  taxation, 
viz.,  a  graduated,  progressive  income  tax,  and  a  graduated,  pro- 
gressive inheritance  tax,  both  of  which  now  being  allowable  under 
the  present  constitution. 

The  classification  amendment  will  permit  the  legislature  to 
treat  the  various  kinds  of  property  with  varying  burdens.  Min- 
nesota, for  example,  assesses  iron  ore,  mined  and  unmined  and 
land  containing  ore  at  50%  of  true  full  value;  household  goods 
and  personal  effects  at  25%;  live  stock,  merchants'  stock,  manu- 
facturers' material,  tools,  implements  and  unplatted  real  estate 
(farms)  at  33  1/3%  ;  all  other  real  estate  (city  lots)  and  other 
personal  property  at  40%.  Reducing  this  to  a  full  assessment 
basis  would  mean  that  iron  ore,  mined  or  unmined  and  lands 
containing  iron  ore,  would  be  assessed  at  100%  ;  household  goods 
and  personal  effects  at  50%  ;  live  stock,  merchants'  stock,  manu- 
facturers' material,  tools,  implements  and  farms  at  66  2/3%,  and 
city  lots  and  personal  property  at  80%.  It  needs  no  vivid  im- 
agination to  forecast  considerable  discussion  and  change  of  this 
basis  as  time  goes  on. 

In  North  Dakota  where  the  classified  amendment  has  been  in 
force  three  years,  an  act  was  passed  two  years  ago,  dividing  the 
assessable  property,  not  subject  to  gross  earnings  taxes  or  other- 
wise exempt  from  the  general  property  tax,  into  three  classes. 
Class  one  includes  all  town  land  and  city  lots,  railroads,  express 
and  telegraph  property  and  bank  stock — which  are  to  be  assessed 
at  30%  of  full  value.  Class  two,  which  includes  patents,  royalties, 
telephones,  etc.,  is  to  be  assessed  at  20%.  Class  three,  which  in- 
cludes, among  other  property,  stocks,  bonds,  moneys  and  credits, 
not  assessed  under  the  flat-rate  law,  is  to  be  assessed  at  5%  of  the 
full  value.  It  will  be  noted  that  class  one  is  assessed  at  a  value 
six  times  as  high  as  class  three.  Taxation  will  remain  a  lively 
subject  of  discussion  and  make  intelligent  students  of  the  subject 
in  this  state. 


BY   JOHN   A.   ZANGERLE,   COUNTY   AUDITOR 


UNFORTUNATE  PHRASEOLOGY 

There  is  some  doubt  as  to  whether  the  "rate  of  taxation" 
phraseology  of  the  amendment  will  permit  a  registration  or  re- 
cording tax,  payable  once  and  for  all.  Such  taxes  have  been  up- 
held in  Michigan,  because  the  constitution  permits  "specific"  taxes 
outside  of  classified  property  taxes.  There  is  some  doubt  as  to 
whether  the  changed  constitution  will  not  require  the  continuation 
of  discovery  of  property,  its  valuation,  assessment,  levy  and  col- 
lection as  at  present.  If  the  phrase  is  understood  in  the  sense  as 
now  used,  it  will  require  a  valuation  and  a  levy  in  each  case  as 
at  present.  This  would  certainly  be  calamitous.  If  the  Auditors 
of  each  county  are  to  discover  all  intangible  property  under  the 
amendment  as  in  the  past,  a  low  rate  will,  of  course,  produce 
more  property,  but  surely  not  sufficient  to  compensate  for  the 
loss  due  to  reduced  rates. 

The  phraseology,  requiring  that  "all  rates  shall  be  just,"  is 
also  unfortunate.  I  very  much  fear  this  will  throw  much  de- 
sirable legislation  into  the  courts  for  determination  as  to  the  fair- 
ness and  justice  of  rates  proposed. 

Balancing  the  advantages  and  disadvantages  of  the  proposed 
amendment,  the  writer  favors  the  amendment  as  a  slight  step  in 
the  path  taken  by  other  states  and  in  evolution  of  necessary  re- 
form. The  Auditor's  ideas  of  needed  reforms  are  more  clearly 
set  forth  in  his  "Untaxed  Wealth  of  Cleveland"  as  follows : 


THE  AUDITOR'S  PROGRAM 

"So  long  as  the  general  property  tax  is  the  mainstay 
of  our  taxation  system,  a  classification  of  the  various 
forms  of  property  is  desirable.  We  favor  an  amendment 
to  the  constitution,  classifying  property  as  land,  improve- 
ments, tangible  personal  property,  intangible  personal 
property  and  such  other  additional  classes  as  the  legisla- 
ture may  from  time  to  time  determine  so  that  different 
rates  or  different  bases  may  be  provided  for  each  of  said 
classes  to  the  end : 

(a)  That  automobiles  shall  pay  but  one  registration 
tax  based  upon  the  horse-power  instead  of  a  nominal 

9 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

• 

license  and  a  general  property  tax  which  latter  is  almost 

impossible  of  administration. 

(b)  Mortgages   shall   pay  a   registration  tax  of   50c 
per  $100. 

(c)  Credits,  being  the   excess   money   due  over  the 
money  that  may  be  owed,  shall  pay  a  tax  at  but  nominal 
rates. 

(d)  Improvements  on  land  shall  gradually  be  depre- 
ciated in  assessment  until  they  are  assessed  at  50%   of 
their  value,  similarly  as  is  now  provided  in  the  City  of 
Pittsburgh  and  in  Canadian  cities  generally. 

(e)  The  taxation  of  stocks  of  corporations  of  other 
states  is   unpatriotic,   provincial   and   inequitable.     Reci- 
procity laws  with  other  states  should  be  passed  whereby 
the  stock  of  corporations  of  other  states,  shall  not  be  taxed 
in  Ohio,  if  such  corporation  be  located  in  a  state  having 
reciprocal  laws. 

Almost  any  form  of  taxation  is  preferable  to  the  pres- 
ent   inequitable    personal    property    tax.      We    urge    the 
graded  income  tax,  in  lieu  of  said  general  property  tax  or 
in  supplement  thereto,  as  the  best  present  means  of  pro- 
viding 'immediate    relief   until    a   more    suitable   method 
may  receive   constitutional   and   legal   sanction.     This   is 
the  path  Wisconsin  has  chosen.    If  it  is  adopted  as  a  sup- 
plement, then   any   personal   property  tax   paid   shall   be 
deducted  from  the  income  tax  if  it  exceed  it." 
It  will  be  noticed  that  the  Auditor  urged  "the  graded  income 
tax,  in  lieu  of  or  in  supplement  thereto,  as  the  best  present  means 
of  providing  relief,"  until  a  more  suitable  method  may  receive 
constitutional  and  legal  sanction.     He  is  still  of  the  same  opinion. 


THE  PROS  AND  CONS  OF  THE  CLASSIFIED 
PROPERTY  TAX 

The  State  of  Pennsylvania  has  probably  had  more  experience 
with  the  classified  property  tax  than  any  other  state  in  the  Union. 
Its  4-mill  tax  on  mortgages,  money  owing  by  solvent  debtors 
(credits),  money  out  at  interest,  shares  of  stock  in  all  corpora- 

10 


BY   JOHN   A.   ZANGERLE,   COUNTY   AUDITOR 

tions  except  such  as  are  subject  to  taxes  on  shares  of  stock  or 
business  in  the  state  (foreign  stocks),  the  loans  of  counties,  cities 
and  minor  political  subdivisions,  (public  bonds)  or  loans  of  busi- 
ness corporations  doing  business  in  Pennsylvania,  formerly  enured 
to  the  benefit  of  the  state  but  since  1913  it  goes  entirely  to  the 
county.  It  is  regarded  as  the  most  successful  classified  property 
tax  in  Pennsylvania,  and  produced  in  1913  a  listing  of  $1,402,- 
000,000  or  about  20c  per  capita.  The  Committee  on  Taxation 
Study  for  the  City  of  Pittsburgh  reported  in  November,  1916,  the 
following  advantages  and  disadvantages  of  the  classified  property 
tax: — 

For  It: 

1.  It  is  vastly  superior  to  the  old  general  property 
tax  still  in  existence  in  many  states  though  rapidly  dis- 
appearing everywhere. 

2.  Where  the  tax  is  collected  at  the  source,  as  in  the 
case  of  corporate  loans,  it  works  well. 

3.  It  succeeds  in  reaching  mortgages,  judgment  and 
personal  property  held  in  trust. 

4.  It  brings  a  large  amount  of  intangible  personalty 
upon  the  assessment  rolls. 

5.  The    tax    is    not    burdensome    upon    investments 
yielding  four,  five  or  a  higher  per  cent. 

6.  It  taxes  the  owner  as  a  person  where  he  resides. 
Against  It: 

1.  It  is  inequitable  per  se  in  that  the  tax  rate  is  uni- 
form upon  all  intangibles  and  so  recognizes  no  difference 
between  the  investment  yielding  2%  and  one  yielding  6%. 

2.  It  is  inequitable  and  unfair  in  that  it  reaches  per- 
sonal property  held  in  trust  which  in  many  instances  is 
the  sole  source  of  income  of  widows  and  orphans,  while 
the  security  holdings  of  thousands  of  the  middle  class  go 
untaxed. 

3.  It  leaves  untouched  in  the  aggregate  a  vast  amount 
of  ''moneyed  investments"  taxable  under  the  law,  because 
there  is  no  source  of  information  except  the  honesty  of 
the   individual   in  assessing  himself,  which  by  universal 

11 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

experience  stands  condemned  as  untrustworthy.  Failure 
to  reach  this  class  of  taxables  necessarily  throws  the  bur- 
den of  raising  revenue  upon  other  classes,  especially  real 
estate  which  can  not  escape  the  taxing  officials. 

4.  The  failure  to  assess  and  collect  this  tax  leaves 
thousands  of  persons  with  comfortable  incomes  without 
any  fiscal  "stake"  or  interest  in  government,  city,  county 
or  state. 

Referring  to  the  4-mill  tax  on  intangibles  in  Pennsylvania, 
the  taxation  committee  have  to  say,  "The  law  requires  every  per- 
son to  make  a  tax  return  under  oath  of  all  taxable  moneys  and 
credits."  Upon  the  refusal  or  failure  of  any  person  to  make  the 
required  return,  the  assessors  are  authorized  to  make  an  assess- 
ment from  the  best  information  they  can  obtain.  It  is  well  under- 
stood that  this  arbitrary  assessment  feature  is  not  generally  or 
rigidly  enforced  and  that  millions  of  dollars  of  intangible  prop- 
erty and  thousands  of  persons  subject  to  this  tax  go  untaxed  year 
after  year.  In  fact,  it  is  scarcely  an  exaggeration  to  say  that  the 
vast  majority  of  professional  and  business  men  even  in  our  larger 
cities  never  make  a  return  of  their  intangibles.  Not  a  small  pro- 
portion of  these  men,  if  questioned,  would  express  surprise  at 
the  existence  of  such  a  law. 

Next  to  Pennsylvania,  New  York  is  generally  referred  to  as 
the  state  where  the  classified  property  tax  is  in  most  successful 
operation  and  yet  very  recently  in  the  year  1916  the  large  and 
very  able  committee  appointed  by  the  Mayor  of  New  York  City 
to  devise  ways  and  means  for  securing  additional  sources  of  rev- 
enue for  the  City  of  New  York  was  more  unanimous  in  opposing 
the  extension  of  the  principle  of  the  classified  personal  property 
tax  than  upon  any  other  measure  and  reported  by  an  18  to  4  vote 
to  the  Mayor  as  follows : 

NEW  YORK'S  OPINION 

"Without  repeating  all  the  considerations  which  have 
been  previously  urged,  your  committee  content  themselves 
by  summing  up  the  objections  to  a  low  rate  tax  on  per- 
sonalty, as  follows : 

1.  It  will  require  for  its  successful  operation  a  list- 
ing system  which  has  always  been  repugnant  to  the  cit- 

12 


BY   JOHN   A.   ZANGERLE,   COUNTY   AUDITOR 


izens  of  New  York.  The  listing  system  as  appliecLin 
other  states  to  the  property  tax,  has  always  resulted  ulti- 
mately, with  the  publicity  that  has  by  law  everywhere 
attended  it,  in  an  increase  of  perjury  rather  than  of 
revenue. 

The  schedules  required  to  be  fi-lled  out  for  the  exist- 
ing federal  income  tax  cannot  be  considered  as  a  counter 
argument.  Secret  returns  of  income  are  in  their  practical 
operation  very  different  from  the  public  listing  of  per- 
sonal property,  including  assets  of  all  kinds  and  thus 
necessarily  disclosing  business  secrets. 

2.  The  low  rate  on  personal  property  would  only 
slightly  diminish  the  temptation  to  evasion.     A  rate  of 
four  or  five  mills  represents  a  10%  income  tax  on  4%  or 
5%  bonds,  and  an  additional  income  tax  of  10%  is  not 
likely  to  remove  temptations  to  evasion,  especially  in  a 
state  like  New  York  where,  under  the  law,  residence  for 
the  purpose  of  taxation  can  be  so  easily  changed. 

3.  Even  a  low  rate  of  taxation  on  personal  property 
would  jeopardize  the  interests  of   New  York   City.     If 
levied  upon  securities   it  will   be  an  intolerable  burden 
upon  all   of  these   interests   that   deal   in   securities  and 
whose  profits  are  in  very  slight  relation  to  the  amount  of 
securities  they  may  hold  for  sale. 

In  the  case  of  merchandise,  a  low-rate  tax  will  be  a 
tax  on  assets  and  on  stock  in  trade  which  will  bear  with 
peculiar  hardship  upon  merchants,  as  in  the  large  whole- 
sale centers  stock  in  trade  has  no  net  direct  relation  to 
profits. 

4.  A  low-rate  tax  on  personalty  is  confronted  by  the 
problem  of  debts.    If  no  allowance  is  made  for  indebted- 
ness, the  tax  is  clearly  unjust.     If  allowance  is  made  for 
indebtedness,  inducement  is  given  to  the  creation  of  fic- 
titious debts,  which  will  again  result  in  inequality. 

5.  No  system  of  taxation,  whether  low  rate  or  high 
rate,  can  be  profitably  levied  upon  property  as  such  with 
the  exception  of  a  local  tax  on  real  estate.     The  whole 
tendency  of  modern  times  is  to  estimate  tax-paying  ability 

13 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

in  general  in  terms  of  profit  or  income,  not  in  terms  of 
property. 

6.  A  low  tax  rate  will  entirely  fail  to  reach  those  who 
are  in  possession  of  large  incomes  from  salaries  or  pro- 
fessional exertions. 

7.  A  low-rate  tax  will  not  begin  to  yield  the  revenue 
that  is  required.    In  the  few  states  where  the  low-rate  tax 
has  been  employed,  the  increase  in  revenue  has  been  only 
moderate  and  far  from  what  would  be  needed  in  New 
York.    In  some  of  these  states,  like  Iowa,  there  has  even 
been  an  actual  and  considerable  diminution  of  the  revenue. 

We  believe  therefore,  that  in  the  existing  situation 
of  New  York,  a  classified  personal  property  tax  would  be 
a    step    backward    and    not    a    step    forward.      It    would 
scarcely,  if  at  all,  help  us  in  the  fiscal  emergency  and  it  is 
based  upon  an  erroneous  principle  of  public  finance." 
It  should  be  noted  that  there  is  no  sentiment  for  the  repeal 
of  the  'present  classified  tax  on  "mortgages"  and  "investments." 
The  committee  refuses  to  extend  the  classification  principle. 

The  very  latest  and  very  exhaustive  report  of  the  Mayor's 
Advisory  Committee  in  the  administration  of  the  tax  law  for  the 
City  of  New  York  submitted  December  20th,  1917,  takes  the  same 
general  view: 

"Personal  estate,  if  taxed  directly,  should,  undoubt- 
edly, be  subject  to  low,  classified  rates;  but  experience 
elsewhere  scarcely  warrants  the  belief  that  this  device 
would  by  itself  fully  meet  the  case.  The  Commission 
therefore  regards  a  general  income  tax  as  adapted  to  pro- 
vide increased  revenue  with  the  greatest  degree  of  jus- 
tice ******  An  income  tax  imposed  and  admin- 
istered by  the  federal  government  would  be  the  most 
economical  and  effective  plan,  assuming  a  reasonable  ap- 
portionment of  the  proceeds.  But  devising  any  acceptable 
or  just  method  of  distribution  would  be  a  task  of  the  first 
magnitude.  It  goes  without  saying  that  many  would  dis- 
cern in  a  plan  of  this  kind  a  danger  to  an  essential  element 
of  the  sovereignty  of  the  state,  the  right  to  tax.  Yet,  if 
national,  state  and  local  expenditures  maintain  their  pres- 

14 


BY   JOHN   A.   ZANGERLE,   COUNTY   AUDITOR 

ent  rates  of  growth,  some  mutual  adjustment  of  sources 
of  revenue  cannot  be  avoided.  ******  jf  public 
opinion  will  not  support  a  general  income  tax,  the  classi- 
fication of  personal  property  for  taxation  at  fractional 
rates  should  be  sought." 

Professor  Fred  Rogers  Fairchild  in  the  1917  Bulletin  of  the 
National  Tax  Association,  in  the  same  tenor  says : 

"Another  topic  to  which  special  attention  was  di- 
rected by  the  Chamber  of  Commerce  investigators  was  the 
state  4-mill  tax  on  bonds,  notes  and  other  choses  in  action. 
This  is  a  method  of  reaching  intangible  personalty  which 
has  been  regarded  with  considerable  favor  in  many  states. 
There  is  a  tendency  on  the  part  of  many  to  regard  this 
as  a  solution  of  the  problem  of  the  taxation  of  intangibles. 
Connecticut  was  a  pioneer  in  the  establishment  of  this 
system,  but  up  to  the  present  time  its  results  have  never 
been  investigated.  The  report  of  the  Chamber  of  Com- 
merce study  gives  ample  evidence  to  warrant  the  conclu- 
sion that,  while  a  considerable  amount  of  property  is 
reached,  a  great  deal,  probably  the  great  majority,  entirely 
escapes.  The  absurd  discrepancies  between  the  amounts 
listed  by  the  towns  in  connection  with  their  population, 
are  the  evidence  showing  the  inefficiency  of  the  tax  *  *  * 
*  *  *  the  evidence  presented  leaves  little  room  to  doubt 
that  successful  taxation  of  intangibles  requires  some- 
thing more  than  a  volutary  tax  at  a  moderate  rate  in  lieu 
of  local  assessment." 


PRODUCTIVENESS    OF    THE    CLASSIFIED    PROPERTY 

TAX 

Will  the  proposed  amendment  and  probable  legislation  there- 
under increase  the  reveriue?  The  Auditor  is  frequently  quoted 
as  having  expressed  himself  in  the  affirmative.  He  has  never  ex- 
pressed such  opinion.  On  the  contrary  it  will  probably  produce 
less.  He  has  advocated  the  classified  property  tax  at  a  nominal 
rate  mainly  for  the  purpose  of  securing  uniformity  of  taxation 
and  administration,  especially  as  against  mortgages  and  auto- 

15 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

mobiles.  Money,  he  has  urged,  should  be  considered  as  a  credit. 
The  taxation  of  stocks  of  foreign  corporations  he  believes  to  be 
unpatriotic,  provincial  and  inequitable.  With  such  a  program,  the 
so-called  intangible  tax  would  produce  less  revenue,  the  Auditor 
relying  upon  an  income  and  direct  inheritance  tax  not  only  to 
recoup  such  loss  but  to  enormously  increase  the  taxable  revenue. 
Forgetting  the  Auditor's  program,  however,  what  may  be 
expected  as  to  the  profitableness  of  the  proposed  amendment  with 
a  tentative  flat  tax  rate  of  l/10th  of  a  per  cent  for  money,  2/10ths 
of  a  per  cent  for  credits  including  mortgages  and  likewise  a  2/10th 
of  a  per  cent  on  stocks  and  bonds — rates  frequently  suggested  and 
fair  comparatively  to  other  states  now  employing  the  classified 
property  tax.  To  clarify  the  confusion  and  misapprehension  in 
this  matter,  let  us  examine  more  particularly  what  these  intangi- 
bles now  produce  and  what  they  may  be  expected  to  produce  at  a 
low  rate. 


MONIES 

The  total  amount  of  money  returned  last  year  in  the  County 
of  Cuyahoga  for  taxation  was  $33,372,070,  which  produced  revenue 
in  the  sum  of  approximately  $500,000.00,  or  over  50c  per  capita. 
It  will  be  necessary  to  produce  at  l/10th  of  1%  a  duplicate  of 
$500,000,000  to  secure  the  same  amount  of  revenue.  Will  it  be 
possible  to  raise  such  a  duplicate  or  such  an  amount  of  revenue 
under  the  proposed  tentative  rates?  The  total  bank  deposits  at 
the  present  date  amount  to  approximately  $503,000,000.  Approxi- 
mately $100,000,000  of  the  total  deposits  are  due  to  banks,  bankers 
and  trust  companies ;  $25,000,000  being  war  loan  deposits  which 
cannot  be  taxed  and  the  balance  is  represented  by  postal  savings, 
state  and  municipal  deposits  and  other  U.  S.  loan  deposits.  A 
recent  survey  of  deposits  in  Cleveland  banks  reveals  the  fact  that 
27%  of  the  total  deposits  are  owned  by  non-residents  and  cannot 
be  taxed  which  makes  the  total  amount  of  bank  deposits  taxable  ap- 
proximately $303,000,000.  When  it  is  borne  in  mind  that  probably 
one-half  of  all  the  deposits  in  the  City  of  Cleveland  are  interest 
bearing,  the  other  half  being  commercial  and  non-interest  bearing, 
which  are  seldom  taxed  in  other  industrial  states,  it  will  be  seen 

16 


BY   JOHN   A.   ZANGERLE,   COUNTY   AUDITOR 

that  it  will  not  even  be  possible  to  secure  a  duplicate  TTf  -$300,- 
000,000  and  that  $200,000,000  might  be  nearer  the  mark  which 
therefore  would  produce  $200,000  in  revenue  as  against  $500,000 
levied  last  year.  To  secure  even  such  an  amount,  it  would  be 
necessary  to  change  the  administration  and  collect  the  tax  at  the 
source  through  the  banks  and  not  through  individual  listings. 
Will  the  banks  consent  to  the  imposition  of  this  additional  burden 
of  clerk  hire  and  contention  without  a  struggle? 

Even  property-classifying  states  vary  greatly  in  their  assess- 
ment of  deposits.  Connecticut,  for  example,  exempts  savings  de- 
posits, while  Maryland  and  Pennsylvania  assess  savings  but 
exempt  commercial  accounts.  Massachusetts  gets  only  the  income 
from  deposits,  etc. 


CREDITS 

Will  credits  with  a  recording  tax  of  20c  per  annum  on  each 
$100  of  value  produce  more  revenue  than  credits  including  mort- 
gages now  produce?-  There  was  listed  last  year  $46,978,990*  of 
such  intangible  property  which  produced  approximately  $700,000 
in  revenue,  approximately  70c  per  capita.  It  will  be  necessary 
on  the  suggested  rate  of  2/10ths  ot  \%  to  secure  $350,000,000  to 
the  assessing  duplicate.  While  it  may  be  true  that  the  amount  of 
mortgages  now  of  record  represents  more  than  $350,000,000  in 
value  a  low  rate  tax  against  a  non-resident,  meaning  especially 
insurance  companies,  will  be  just  as  invalid  probably  at  a  low  rate 
as  at  the  present  full  rate.  AVhen  it  is  borne  in  mind  that  probably 
two-thirds  of  the  mortgages  recorded  in  this  county  are  mort- 
gages inuring  to  insurance  companies,  non-residents  and  trust 
companies,  which  are  either  exempt  .as  belonging  to  non-residents 
or  as  otherwise  taxed,  it  must  be  apparent  that  this  source  of 
revenue  would  probably  be  decreased  one-half. 

The  City  of  New  York  is  generally  referred  to  as  an  example 
of  the  successful  administration  of  the  mortgage  tax.  For  the 
year  1916,  the  revenue  derived  for  the  City  of  New  York  was 
$950,000  from  this  source.  This  is  equivalent  to  a  tax  rate  of  iy2% 
on  $60,000,000.  On  a  per  capita  basis,  New  York  Gity  is  deriving 
.approximately  20c  per  annum  while  Cuyahoga  County  (Cleveland) 

17 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

derives  about  70c  per  capita.  While,  therefore,  the  City  of  New 
York  secures  twice  as  much  gross  revenue  as  Cleveland  does  from 
this  source,  the  City  of  New  York  having  eight  times  as  much 
population,  would  indicate  that  on  a  per  capita  basis,  it  was  re- 
ceiving on  its  specific  tax  one-fourth  as  much  as  Cleveland  does 
from  credits  generally  under  the  general  property  tax.  In  this 
connection,  it  should  be  stated,  that  the  proceeds  of  this  mortgage 
tax  are  divided  equally  between  the  state  and  county,  where  it  is 
received,  so  that  the  state  treasury  is  enriched  by  the  like  amount. 

The  State  of  Minnesota  collected  under  its  mortgage  record- 
ing tax  for  the  fiscal  year  ending  July  31st,  1915,  $292,181.05  and 
for  the  fiscal  year  ending  July  31st,  1916,  $346,678.02  or  about  6% 
more  than  this  county.  The  1917  fiscal  year  is  not  yet  available. 
Reduced  to  a  per  capita  basis,  this  amounts  to  about  17c. 

Pennsylvania  in  the  year  1913  at  a  40c  rate  secured  an  aggre- 
gate listing  of  $1,402,000,000,  approximately  one-half  of  which 
represented  the  tax  on  mortgages.  The  return  from  mortgages 
is  therefore  equivalent  to  about  36c  per  capita.  It  should  be  borne 
in  mind  that  Pennsylvania  has  a  low  rate  tax  on  intangibles  (mort- 
ga'ges)  rather  than  a  recording  tax  which  latter  is  by  far  the  more 
preferable.  Pittsburgh  had  an  aggregate  listing  of  $231,092,030 
for  the  year  1916  as  representing  the  aggregate  amount  of  money 
at  interest,  including  mortgages,  bonds,  notes,  stocks,  etc.,  on 
which  the  state  secured  a  revenue  of  $924,368  at  a  4-mill  tax.  This 
represented  a  per  capita  of  over  $1.00.  But,  it  should  be  remem- 
bered that  this  is  the  revenue  for  all  intangibles,  not  merely  for 
credits.  Cuyahoga  County  collects  over  this  amount  per  capita 
from  moneys  and  credits  alone.  (See  table). 

The  State  of  Michigan  collected  from  mortgages  and  bonds 
(secured  by  mortgages,  or  public  bonds)  for 

Mortgages  Bonds  Total  Per  Cap. 

1917 $1,289,475.00  $67,898.82  $1,357,373.82  .50 

1918 671,105.80  68,377.82  739,483.62  .26 

One-half  of  this  amount  goes  to  the  state  and  one-half  to  the 
counties  in  which  the  mortgages  were  recorded,  or  the  tax  on  the 
bonds  was  paid.  The  war  conditions  presumably  are  responsible 
for  the  difference  in  the  receipts  for  the  two  years. 

18 


BY       JOHN       A.       ZANGERLE,       COUNTY       AUDITOR 


STOCKS  AND  BONDS 

In  practically  every  state,  the  shares  of  stock  of  a  resident 
corporation  are  not  taxed,  but  the  stocks  of  a  foreign  corporation 
and  the  bonds  of  public  utilities  and  of  municipalities  and  other 
public  corporations  are  sought  for  taxation.-  There  was  listed  in 
this  county  $53,527,130  of  such  property,  which  produced  approxi- 
mately $800,000  in  revenue  or  about  80c  per  capita.  It  will  be 
necessary  at  the  suggested  rate  of  2/10ths  of  1%  to  get  a  duplicate 
of  $400,000,000.  It  is  very  doubtful  whether  such  amount  of  stocks 
and  bonds  is  held  in  this  county  and  unless  a  registration  tax 
similar  to  that  of  New  York  is  adopted,  it  is  doubtful  whether  the 
$53,000,000  now  secured  would  be  more  than  doubled,  thus  pro- 
ducing a  decided  decrease  in  this  branch. 

In  New  York  they  have  what  is  known  as  the  "Investment 
tax"  against  this  class  of  intangible  property.  There  was  collected 
under  this  tax  for  the  fiscal  year  ending  June  30th,  1918,  $1,399,- 
381.21  in  revenue  or  15c  per  capita.  No  part  hereof  goes  to  local 
taxing  districts.  This  payment  in  fact  secures  the  exemption  of 
this  property  from  local  taxation.  The  City  of  Baltimore  secured 
for  the  1915  year  under  a  3-mill  or  30c  rate  on  $100  of  assessment 
a  listing  of  $210,000,000  of  all  forms  of  intangible  property  which 
may  be  equivalent  to  SOc  per  capita,  assuming  the  city  to  have 
800,000  population.  In  Maryland,  it  should  be  stated,  however, 
only  bonds  and  certificates  of  indebtedness  issued  by  corporations 
and  stocks  of  foreign  corporations  are  within  the  purview  of  the 
law.  Ordinary  mortgages,  book  accounts  of  merchants  and  savings 
accounts  are  not  included  within  the  classification  as  they  are  in 
manv  other  states. 


AUTOMOBILES 

Assuming  that  the  new  amendment  to  the  Constitution  will 
permit  a  horse-power  registration  tax  against  automobiles,  will  it 
prove  more  productive  than  the  present  registration  tax  by  the 
state  and  the  general  property  tax  by  the  county?  The  present 
registration  tax  of  approximately  40,000  cars  in  this  county  pro- 
vides to  the  state  approximately  $196,000  from  this  county.  The 
19,500  cars  listed  show  a  value  of  $6,816,000  which  provides  a 

19 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

revenue  under  the  general  property  tax  law  of  $105,993.  The  total 
revenue  derived  under  both  forms  of  taxation  provides  approxi- 
mately $302,000. 

The  horse-power  tax  law  passed  by  the  legislature  several 
years  ago  which  provided  an  initial  rate  of  $5  for  automobiles 
with  a  20-horse  power,  running  up  to  $16  for  cars  with  61-horse 
power,  would  have  provided  a  revenue  of  $332,315.  From  the 
foregoing,  it  will  be  evident  that  the  proposed  horse-power  tax 
would  pay  about  the  same  amount  of  revenue,  perhaps  $30,000 
more  than  the  present  general  property  tax  and  registration  tax. 
As  to  what  amount  would  inure  to  local  authorities  would  depend 
upon  the  apportionment  of  this  revenue  to  be  fixed  by  the  legisla- 
ture. It  might  be  possible  that  the  state  would  insist  on  the  major 
share  thereof,  as  in  some  of  the  other  states.  Indeed,  in  a  con- 
sideration of  the  productiveness  of  proposed  intangible  taxes,  the 
possibility  of  a  local  loss  through  an  increased  apportionment  of 
the  revenue  to  be  derived  from  such  new  classified  property  tax 
has  been  given  no  attention.  It  makes  little  difference  perhaps 
in  that  the  legislature  undoubtedly  would  agree  to  a  re-appor- 
tionment of  old  sources  of  revenue  if  new  ones  were  secured  to  it. 
The  total  revenue  is  the  desideratum. 


THE    CUYAHOGA    COUNTY   PERSONAL   PROPERTY 

DUPLICATE 

It  is  evident  from  the  foregoing  chapters  that  the  revenue  to 
be  derived  from  intangibles  and  from  automobiles  under  a  classi- 
fied property  tax  will  be  much  less  than  at  present  realized  there- 
from. It  may  be  asked  why  such  a  different  situation  exists  here 
as  compared  with  other  cities  and  states  where  the  almost  uniform 
experience,  viz.,  an  increase  of  revenue  resulted  in  the  adoption 
of  the  classified  property  tax.  The  Auditor  can  explain  it  only 
by  urging  that  the  general  property  tax  laws  have  been  more 
vigorously  administered  in  Ohio,  especially  as  against  corpora- 
tions than  anywhere  else  in  the  populous  states. 

The  administrative  requirement  that  corporations  furnish 
the  department  with  a  "balance  sheet"  has  certainly  been  a  ten 
strike,  and  has  practically  doubled  the  return.  Without  this  bal- 

20 


BY   JOHN   A.   ZANGERLE,   COUNTY   AUDITOR 

ance  sheet,  there  could  be  no  uniformity  and  the  assessment  of 
corporations  would  degenerate  into  the  same  farce  that  generally 
characterizes  the  work  elsewhere  in  the  United  States. 

Both  this  county  and  the  State  of  Ohio  are  now  assessing  an 
unusually  large  amount  of  personal  property  as  compared  with 
other  states  and  cities,  as  is  evident  from  the  proportion  of  per- 
sonal property  to  realty  set  forth  in  the  following  table : 


%  of 
Total 

Personal 
Property 

%of 
Total 

Total 

95.81 

$342,963,540 

4.19 

$8,204,862,430 

71.31 

227,066,472 

25.14 

940,450,171 

99.86 

2,034,635 

0.14 

1,533,791,867 

67.74 

175,030,145 

26.83 

652,261,285 

79.65 

303,117,620 

20.35 

1,489,608,820 

70.00 

135,624,810 

30.00 

452,255,100 

87.72 

62,652,079 

12.28 

510,429,316 

68.50 

238,278,975 

31.50 

756,831,185 

REAL  AND  PERSONAL  PROPERTY  ASSESSMENTS 

COMPARED 


Real 
Estate 

New  York    $7,861,898,890 

Chicago    670,652,219 

Philadelphia     .  .  .    1,531,757,232 

St.  Louis    441,853,410 

Boston    .  ...    1,186,491,200 

Detroit    316,630,290 

San   Francisco.  .  .  .     447,777, 2'37 
Cleveland    518,552,210 


The  above  figures  are  taken  from  the  Report  of  the  Depart- 
ment of  Commerce,  Bureau  of  the  Census  for  the  year  1912.  It 
should  be  borne  in  mind  in  connection  herewith  that  several  of 
these  cities  have  other  sources  of  income,  some  from  public  fran- 
chise contributions,  from  liquor  licenses,  from  rentals  of  public 
property,  from  registration  and  income  taxes. 

It  will  be  noted  that  the  percentage  of  personal  property  se- 
cured in  Cleveland  was  31*/2%,  a  larger  proportion  than  was  en- 
joyed by  any  other  city.  In  a  general  way,  it  may  be  stated  that 
the  proportion  of  personal  property  to  real  estate  in  the  State  of 
Ohio  generally  is  about  33  1/3%  which  is  therefore  heavier  than 
elsewhere  of  the  quoted  cities. 

Let  us  inquire  as  to  the  productiveness  of  the  general  property 
lax  against  intangibles  in  other  counties  of  the  state. 


21 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

PRODUCTIVENESS  OF  INTANGIBLES 
OHIO  COUNTIES— PER  CAPITA 


Aver 
age 
Rate 
1.33 

1.50 
1.10 
1.00 
1.20 
1.35 
1.10 
1.50 
1.30 
1.40 

State  of  Ohio  

County  Seat 

Est.  Pop.   g 
4  767  000 

!.  &  B.   Credits    Money 

$   .37        $   .57        $   .50 
.80             .70             .50 
.25             .40             .34 
1.33             .74             .53 
.19          1.54           1.07 
.38             .78             .57 
.05             .39             .45 
.47             .59             .45 
.44             .53             .41 
.30             .29             .29 

Total 

$1.44 
2.00 
.99 
2.60 
2.80 
1.73 
.89 
1.51 
1.38 
.88 

Cuyahoga  County  . 
Lorain  County 

.  .Cleveland     . 
Elvria 

.1,000,000 
.       82,920 
..       23,330 
.        24,130 
.     120,120 
14,670 
.     477,380 
.     240,12'0 
.     205.450 

Lake  County  

.  .  Painesville 

Medina  County 
Summit  County   .  .  . 
Geaugra  County 

.  .  Medina    .  ..  . 
.  .  Akron     .  .  .  . 
.  Chardon 

Hamilton  County  . 
Franklin  County  .  . 
Lucas  County  . 

.  .  Cincinnati    . 
.  .Columbus     . 
.  .  Toledo    . 

In  arriving  at  the  above  table,  data  from  the  1916  duplicates 
(the  latest  available  in  printed  form)  was  taken  except  in  Cuya- 
hoga  where  the  1917  data  is  of  course  at  hand.  The  population  is 
taken  from  the  1913  Census  Report  except  in  Cuyahoga  County 
where  a  1,000,000  is  taken  which  will  be  acknowledged  to  be  rather 
high  (possibly  75,000)  and  therefore  cause  relatively  too  low  a 
per  capita  result.  The  average  tax  rates  in  the  various  counties 
were  of  course  estimated,  except  those  in  Lake  and  Medina 
Counties,  where  an  average  rate  was  secured  by  multiplying  the 
various  taxing  districts'  duplicate  by  the  respective  rates  and 
then  dividing  the  aggregate  revenue  by  the  aggregate  value. 

The  rate  taken  in  Cuyahoga  County  is  $1.50.  The  actual  rate 
in  Cleveland  and  Lakewood  last  year  was  $1.555  per  $100  of  as- 
sessment. These  two  cities  represented  approximately  90%  of 
all  personal  property  in  the  county.  Hence,  a  tentative  rate  of 
$1.50  is  probably  a  very  close  average  rate.  If  this  rate  of  $1.50 
is  excessive  it  is  neutralized  by  the  excessive  population  factor 
used. 

The  high  per  capita  of  credits  and  money  of  Medina  may  be 
explained  in  that  it  is  the  home  of  one  of  the  leading  insurance 
companies  of  the  United  States.  The  high  per  capita  of  stocks 
and  bonds  of  Lake  County  may  be  explained  in  that  this  county 
contains  many  wealthy  people  in  Painesville,  Mentor,  Willoughby 
and  Wickliffe,  who  really,  in  business  enterprises  and  otherwise, 
should  be  classed  as  of  Cleveland.  Many  transportation  companies, 
of  Cleveland  list  their  property  in  Lake  County.  The  figures 
show  that  while  Cuyahoga  County  receives  more  revenue  per 

22 


BY   JOHN   A.   ZANGERLE,   COUNTY   AUDITOR 

capita  from  intangible  than  the  state  at  large,  that  'a  number  of 
counties  immediately  adjoining  it  receive  a  larger  per  capita,  viz., 
Lake,  Medina  and  Summit  Counties.  The  latter  is  undoubtedly 
due  to  the  very  wealthy  and  prosperous  rubber  companies  operat- 
ing there.  The  table  is  also  interesting  as  refuting  the  idea  of 
many  people  in  strictly  rural  counties  that  only  agricultural 
counties  assess  their  intangibles. 

While  some  of  the  agricultural  counties,  e.  g.,  Lake  and  Me- 
dina, tax  intangibles  apparently  as  heavily  and  more  per  capita  as 
the  industrial  counties,  they  make  a  very  poor  showing  in  the 
property  of  merchants  and  manufacturers,  which  should  be  shown, 
lest  they  feel  that  they  are  unjustly  imposed  upon  by  the  local 
assessing  authorities. 

Merchandise  and  Tools  of  Merchants  and  Manufacturers 

Dollars  Per  Capita 


County 

County  Seat 

Est.  Pop.    ] 

Mdse. 

Mfg. 

Tools 

Total 

1.33 

State  of  Ohio  .  .    . 

4  767  000 

.47 

.97 

.97 

2.41 

1.50 

Cuyahoga  County 

.  ..  .  Cleveland     . 

.1,000,000 

.62 

1.21 

.60 

2.43 

1.10 

Lorain  County 

.  .  .  .  Elyria    .    ... 

82,920 

.26 

1.50 

.04 

1.80 

1.00 

Lake  County  .  . 

Painesville 

23,330 

.25 

.34 

.20 

.79 

1.20 

Medina  County  .  . 

Medina     .... 

24,130 

.28 

.43' 

.03 

.74 

1.35 

Summit  County    . 

.  .  .  .  Akron     

.     12'0,120 

.48 

4.48 

.19 

5.15 

1.10 

Geauga  County   .  . 

.  .  .'.  Chardon     .  .. 

14.670 

.17 

.08 

.04 

.29 

1.50 

Hamilton  County 

.  ..  .  Cincinnati    . 

.     477,380 

.66 

1.56 

.03 

2.25 

1.30 

Franklin  County 

,  .  .  .  Columbus     . 

.     240,120 

.67 

.85 

.04 

1.56 

1.40 

Lucas  County   .  .  . 

.  .  .  .  Toledo     .... 

.     205,450 

.87. 

1.13 

.04 

2.04 

INTANGIBLE  RATES 

Are  the  rates  used  to  show  the  probable  productiveness  of 
the  classified  property  tax  too  low?  One-tenth  of  1%  has  been 
taken  as  a  tentative  rate  for  deposits  and  a  rate  of  two-tenths  of 
\%  has  been  taken  for  other  intangibles.  A  study  of  rates  in 
other  states  will  be  interesting,  showing  the  probable  rate  that 
may  be  adopted  by  the  legislature  under  the  proposed  constitu- 
tional amendment. 


23 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 


THE  TAX  ON  INTANGIBLES  IN  OTHER  STATES 

(Stocks,  Bonds,  Mortgages,  Debentures,  Choses  in  Action) 
Computed  on  an  Annual  Basis 

Cleveland 

Rate 
Connecticut 

Optional  statute  equivalent  to 4        mills  or  .4     %       1.555% 

Iowa 5  "       "    .5     % 

Maryland 

3  mills  local,  and  say  the  maximum  of  1,5  mills 

state      4.5         "      "    .45   % 

Minnesota 

Securities 3  "      "    .3     % 

Mortgages 0.3         "       "    .03   % 

Michigan 

Mortgage  securities   (based  on  a  25  year  bond) 

say 0.2         "       "    .02  % 

Mortgages  (based  on  a  3  year  mortgage)   say..  1.66      "       "    .166% 
New  York 

Securities   (based  on  a  25  year  bond)  say 0.2         "       "    .02  % 

Mortgages  (based  on  a  3  year  mortgage)   say.. 1.66      "      "    .166% 

Pennsylvania        4  "       "    .4     % 

Rhode   Island    4  "       "    .4     % 

Wisconsin 

(Capitalizing  the  income  tax  on  a  5%  basis)  .  .  .5  to  3  mills  or 

.50   to   .30 

The  above  table  was  prepared  by  W.  Hastings  Lyon,  Counsel 
of  Committees,  Investment  Bankers'  Association  of  America,  four 
years  ago.  While  some  of  the  taxes  are  paid  once  for  all  as  a 
recording  registration  tax,  others  are  paid  annually.  New  York, 
for  example,  imposes  a  50c  per  $100  of  value  as  a  recording  tax 
and  50c  per  $100  of  value  on  secured  debts  on  real  estate  outside 
of  the  state.  Minnesota  imposes  a  once  for  all  tax  on  securities 
and  a  recording  tax  on  mortgages.  Michigan  has  adopted  a  once 
for  all  registration  and  recording  tax.  Connecticut  has  provided, 
in  lieu  of  the  general  property  tax  on  intangibles,  a  once  for  all 
payment  of  4  mills  on  intangibles.  Massachusetts  several  years 
ago  adopted  a  registration  tax  of  3  mills  on  intangibles  to  be  paid 
once  for  all,  which  has  since  given  way  to  an  income  tax  on  in- 
tangibles. 

It  will  be  noted  from  the  above  that  the  registration  and  re- 
cording tax  are  entirely  different  from  the  low  rate  full  value 
classification  method  of  taxing  intangibles.  The  registration  and 
recording  tax  is  a  simple  inexpensive  method  of  securing  a  fair 
amount  of  revenue  from  this  source  of  property  with  absolute 

24 


BY   JOHN   A.   ZANGERLE,   COUNTY   AUDITOR 


uniformity,  while  the  low  rate  full  value  method  retains  all  the 
present,  practically  impossible  conditions  of  valuation  and  admin- 
istration. The  Auditor  feels  that  only  in  so  far  as  the  method  of 
administration  and  valuation  is  changed  to  a  once  for  all  collection 
will  the  low  rate  produce  substantial  revenue. 


STATE  COMPARISONS  DIFFICULT 

The  results  of  the  flat  tax  in  other  states  are  difficult  to  ap- 
praise. The  imposition  of  this  tax  is  so  varied  in  the  different 
states  that  it  makes  the  results  incomparable.  In  the  first  place, 
the  administration  in  some  states  is  centralized  and  in  others 
localized.  In  the  next  place,  not  all  kinds  of  intangible  property 
are  subject  to  the  flat  tax  in  any  of  the  states  aforementioned 
which  now  have  classified  intangible  property  for  taxation  at  rates 
from  two  to  five  mills,  or,  in  other  words,  from  one-fifth  to  one- 
half  per  cent. 

Prof.  Chas.  J.  Bullock  of  Harvard  University  commenting 
on  the  flat  tax,  says : 

"Stocks  of  domestic  corporations  are  everywhere  ex- 
empt. Savings  deposits  are  often,  if  not  always  exempt. 
Mortgages  on  domestic  real  estate  are  exempt  in  Minne- 
sota and  Maryland.  Stocks  of  foreign  corporations  are 
exempt  in  Minnesota.  Intangibles  yielding  no  income  are 
exempt  in  Maryland  and  there  has  been  some  question 
whether  bank  deposits  are  taxable  under  the  Pennsylvania 
law.  It  should  suffice  that  those  conversant  with  the  tax 
in  Pennsylvania,  Rhode  Island,  Minnesota  and  Maryland 
testify  that  the  financial  results  are  good  and  that  the 
revenue  from  this  source  tends  steadily  towards  increase." 
(As  to  whether  or  not  the  financial  results  are  good  in  the 
various  states  would  depend  largely  on  how  poor  the  conditions 
of  administration  were  before  the  imposition  of  the  flat  tax). 

A  very  important  consideration  in  the  success  or  failure  of 
a  flat  tax  must  be  the  treatment  of  the  right  to  offset  on  account 
of  indebtedness..  In  some  of  the  states,  as  Rhode  Island  and 
Iowa,  debts  of  any  description  can  be  offset  against  taxable  credits 
with  the  result  that  we  find  unlimited  debt  deduction  (debts  for 

25 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

land  or  tangible  property)  from  a  limited  class  of  property  (in- 
tangible). Minnesota  goes  to  the  other  extreme  and  permits  no 
offset  of  debts.  In  the  first  case,  revenue  from  the  flat  tax  suffers, 
and  in  the  second  place,  considerable  hardship  may  occur  to  the 
taxpayer.  Prof.  Bullock  again  commenting  on  this,  says : 

"Both  difficulties  might  be  obviated  by  deducting  the 
appropriate  amount  of  debts  which  has  been  followed  in 
the  Massachusetts  income  tax.  Taxpayers  might  be  safely 
permitted  to  deduct  from  the  value  of  their  taxable  in- 
tangible property  such  a  proportion  of  their  debts  as  the 
amount  of  their  taxable  intangibles  bears  to  their  total 
property." 

Oscar  Laser  of  Maryland  likewise  indicated  in  a  discussion 
of  the  classified  property  tax  before  the  National  Tax  Association 
in  1915  how  misleading  and  incomparable  are  the  figures  of  the 
low  rate  tax.  He  says  the  classified  low  rate  tax  on  intangibles 
in  Connecticut  includes  choses  in  action  (credits)  and  not  shares- 
of  corporations.  On  the  other  hand,  in  Minnesota  it  includes 
book  accounts  and  in  Maryland  it  does  not  include  book  accounts. 
The  book  accounts  of  merchants  are  not  taxed  in  Maryland.  In 
Maryland  it  does. not  include  mortgages  while  on  the  other  hand 
in  Pennsylvania  it  does  include  mortgages.  Maryland  does  not 
tax  mortgages  and  in  fact  does  not  tax  any  non-productive  se- 
curities or  credits. 


1917  INTANGIBLE  TAX  LEGISLATION 

Feverish  change  characterizes  the  taxation  of  intangible 
property  in  almost  every  state,  especially  where  the  constitution 
is  elastic  and  permits  change  in  laws.  Mr.  C.  C.  Williamson. 
Municipal  Reference  Librarian  of  New  York  City,  indicates 
some  of  the  many  changes  in  the  taxation  of  intangible  property 
adopted  during  the  last  year : 

"Tennessee  has  imposed  a  state  tax  on  mortgages  and 
deeds  of  trust  and  some  instruments  on  real  and  personal 
property  in  lieu  of  all  other  taxes.  The  rate  is  15c  on 
each  $100  of  such  indebtedness  which  must  be  paid  before 
the  instrument  is  recorded." 

26 


BY   JOHN   A.   ZANGERLE,   COUNTY   AUDITOR 


"In  Connecticut,  mortgage  bonds  of  a  corporation  se- 
cured by  a  lien  upon  its  property  in  the  state  are  ex- 
empted to  the  extent  to  which  the  property  is  assessed 
locally.  If  the  total  amount  of  such  bonds  exceeds  the 
assessed  value  of  property  in  the  state,  such  a  percentage 
of  the  value  of  each  bond  is  exempt  as  the  total  of  assessed 
value  bears  to  the  total  amount  of  bonds  outstanding.'" 

"One  of  the  new  Kentucky  laws  imposes  a  tax  of  20c 
on  each  $100  or  fraction  thereof  of  indebtedness  secured 
by  a  mortgage  on  property  in  the  state  if  the  indebted- 
ness does  not  mature  within  five  years." 

"Minnesota  has  adopted  an  amendment  imposing  a 
tax  of  15c  on  each  $100  of  real  estate  mortgages  in  the 
state  maturing  within  five  years  and  25c  on  each  $100  of 
such  mortgages  or  parts  of  mortgage  debts  not  maturing 
within  five  years." 

"The  New  York  'secured  debt'  tax  law  has  been  super- 
ceded  by  a  tax  on  investments  constituted  along  similar 
lines  and  also  designed  to  reach  securities  which  have 
usually  escaped  the  personal  property  tax.  Under  the 
new  law,  the  owner  of  an  'investment'  may  secure  its  ex- 
emption from  the  personal  property  tax  for  one  or  more 
years,  not  exceeding  five,  by  paying  to  the  State  Comp- 
troller a  tax  of  20c  on  each  $100  face  value  for  each  year 
of  exemption  desired.  If  not  exempted  under  the  law, 
the  owner  must  pay  a  personal  tax  without  deduction  of 
just  debts  owing  by  him.  A  new  penalty  has  been  added 
in  which  investments  of  decedents  not  exempted  under 
the  old  'secured  debts'  law  or  under  the  present  law  must 
pay  an  additional  inheritance  tax  of  5%  unless  it  can  be 
proven  that  the  personal  property  tax  on  them  has  been 
paid.  'Investments'  include  bonds  of  railroad  companies, 
public  utility  corporations  and  individual  corporations 
whose  properties  are  located  outside  of  the  state,  deben- 
tures and  bonds  of  other  states  and  municipalities  in  other 
states  and  of  foreign  governments. 

"'Secured  debt'  tax  laws  in  force  from  September  1, 
1911,  to  April  1st,  1915,  permit  bonds  and  certain  other 

27 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

obligations  to  be  permanently  exempted  from  the  per- 
sonal property  taxes  on  payment  of  one-half  of  1%  of 
face  value;  and  from  May  1st,  1915,  to  October  31,  1915. 
from  April  21,  1916,  to  December  31st,  1916,  permitted 
exemptions  from  personal  property  taxes  for  five  years  on 
payment  of  a  tax  of  ^4  of  1%.  The  new  law  expressly 
continues  the  exemption  obtained  under  these  laws." 

"Missouri  has  passed  an  act  under  which  'secured 
debts'  are  considered  as  'separate  and  distinct'  class  of 
property,  for  taxation.  This  includes  state  and  municipal 
bonds,  bonds  and  notes  secured  by  collateral  as  well  as 
bonds  not  payable  in  one  year  secured  by  collateral  or 
deed  of  trust  wholly  or  in  part  on- real  estate.  Some  deeds 
taken  to  the  County  Recorder  are  exempt  from  all  other 
taxes,  state  and  local,  by  the  payment  of  5c  for  each  $100 
face  value  when  the  date  of  maturity  is  less  than  one  year 
from  the  date  of  payment  of  the  tax;  lOc  on  each  $100 
when  maturity  is  from  one  to  two  years;  15c  when  two  to 
three  years ;  20c  when  three  to  four  years,  and  25c  if  more 
than  four  years.  Renewals  are  taxable  at  the  rates  pro- 
vided for  the  original  security." 

"An  interesting  feature  of  the  law  is  a  provision  per- 
mitting each  county  of  the  state  to  levy  a  like  tax  on 
secured  debts  owned  by  residents  of  the  county,  the  total 
of  which  may  not  exceed  the  total  levy  for  state  purposes. 
Each  city  and  town  may  also  levy  a  secured  debt  tax  on 
its  residents  up  to  the  amount  levied  by  the  state." 

"The  Michigan  secured  debt  tax  has  been  extended  to 
include  bonds  of  other  counties  or  states." 

"North  Carolina  has  provided  a  law  which  exempts 
from  taxation  notes  and  mortgages  given  for  the  purchase 
of  a  home,  not  exceeding  $3,000  and  running  not  less  than 
five  years  nor  more  than  twenty  years  if  the  interest  does 
not  exceed  5.5%." 

"A  Vermont  act  permits  a  mortgagee  or  assignee  of  a 
real  estate  mortgage  to  pay  the  tax  and  add  it  to  the  deed 
or  obligation  secured  by  the  mortgage." 

"By  a  constitutional  amendment  proposed  in  Montana 

-28 


BY   JOHN   A.   ZANGERLE,   COUNTY   AUDITOR 

(1917)  mortgages  on  record  of  real  or  personal  property 
within  the  state  are  to  be  exempted." 

"Oklahoma  has  levied  a  flat  tax  rate  on  bonds,  notes 
of  any  duration  over  eight  months  and  choses  in  action. 
Such  intangibles,  if  taken  or  sent  to  the  County  Treasurer 
and  listed,  will  pay  a  tax  of  2%  on  their  face  value  for 
five  years,  or  at  the  same  rate  for  a  longer  or  shorter 
period." 

"A  Minnesota  act  amends  the  definition  of  the  term 
'credits'  so  as  to  include  shares  of  stocks  in  foreign  cor- 
porations, the  property  of  which  is  not  assessed  in  the 
state.  Such  property  which  heretofore  has  been  subject 
to  the  regular  property  tax  at  40%  of  its  value  will  now 
be  listed  and  assessed  as  money  and  credits  and  taxed  at 
the  uniform  rate  of  3  mills  on  $1  in  lieu  of  all  other 
taxation." 

"A    North    Dakota   act,   modeled    on    the    Minnesota     . 
statute,  levies  a  rate  of  3  mills  in  lieu  of  all  other  taxes, 
on  moneys  and  credits  including  stocks  and  bonds  with 
no  deduction  for  liabilities." 

"One  of  the  new  Kentucky  laws  levies  on  deposits  a 
tax  of  one-tenth  of  1%  annually  in  lieu  of  all  other 
taxes." 


INCOME  TAX  LEGISLATION  OF  1917 

A  general  income  tax  was  enacted  in  Missouri  last  year. 
The  law,  which  applies  to  corporations  as  well  as  individuals  is 
an  adaptation  of  the  Federal  income  tax  law  to  which  it  conforms 
generally.  One-half  of  one  per  cent,  is  levied  on  incomes  from 
all  sources  in  excess  of  $3,000  for  single  and  $4,000  for  married 
persons. 

In  Delaware  an  income  tax  of  1%  was  levied  on  the  net  in- 
comes of  natural  persons  whose  gross  income  is  $1,000  or  more. 
Corporations  are  now  under  the  income  tax  in  Delaware. 

Perhaps  the  most  important  act  of  the  year  is  the  New  York 
tax  of  3%  on  incomes  of  manufacturing  and  mercantile  corpora- 

29 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

tions.  As  is  the  case  in  several  other  states,  the  administration 
of  this  income  tax  is  simplified  by  making-  use  of  the  Federal 
income  tax  return.  The  new  tax  supplants  the  personal  property 
tax,  capital  stock  tax  and  the  annual  franchise  tax  as  applied  to 
these  classes  of  corporations.  (Manufacturing  corporations  have 
not  been  subject  to  the  annual  franchise  tax).  One-third  of  the 
revenue  is  returned  to  the  counties  in  which  the  corporations 
have  real  or  personal  property  or  their  principal  office  in  the 
state.  Among  other  states  that  have  recently  adopted  the  income 
tax,  either  general  or  special,  are  the  states  of  Connecticut,  Okla- 
homa and  Wisconsin. 


WISCONSIN  INCOME  TAX 

The  Wisconsin  income  tax  merits  special  consideration  as 
being  the  first  state  to  adopt  and  successfully  carry  out  a  general 
income  tax,  notwithstanding  the  adoption  during  the  last  session 
of  the  legislature  of  a  dozen  or  more  amendments  thereto.  The 
Auditor  is  strongly  wedded  to  its  principles  and  urges  its  pro- 
visions for  Ohio's  dilemma.  The  progressive  rates  adopted  by  this 
state  are  as  follows : 


CORPORATION  RATES 


Taxable 
Income 


Rate 
Per  Cent 


1st    $1,000     2 

2nd    $1,000    2y2 

3rd    $1,000    3 

4th    $1,000     3% 

5th    $1,000     4 

6th    $1,000 5 

7th    $1,000    6 

8th    $1,000     6 

9th    $1,000     6 

10th    $1,000     6 

15th    $1,000     6 

20th    $1,000     6 


Total  Income 

Tax 

Taxed 

$2'0.00 

$    1,000 

25.00 

2,000 

30.00 

3,000 

35.00 

4,000 

40.00 

5,000 

50.00 

6,000 

60.00 

7,000 

60.00 

8,000 

60.00 

9,000 

60.00 

10,000 

60.00 

15,000 

60.00 

2'0,000 

30 

True  Rate  on 
Total    Whole  Am't 
Tax          in  Even 
Thousands 


5       20.00 

45.00 

75.00 

110.00 

150.00 

200.00 

260.00 

320.00 

380.00 

440.00 

740.00 

1,040.00 


2. 

2.25 

2.5 

2.75 

3. 

3.3333 

3.7143 

4. 

4.2222 

4.4 

4.9333 

5.2 


BY       JOHN       A.       ZANGERLE,       COUNTY       AUDITOR 


INDIVIDUAL  RATES 


Taxable 
Income 


Rate 
Per  Cent 


Tax 


Total  Income 
Taxed 


$10.00 

$   1,000 

$   10.00 

12.50 

2,000 

22.50 

15.00 

3,000 

%  37.50 

17.50 

4,000 

55.00 

20.00 

5,000 

75.00 

25.00 

6,000 

100.00 

30.00 

7,000 

130.00 

S5.00 

8,000 

165.00 

40.00 

9,000 

205.00 

45.00 

10,000 

250.00 

50.00 

11,000 

300.00 

55.00 

12,000 

355.00 

60.00 

13,000 

415.00 

60.00 

15,000 

535.00 

60.00 

20,000 

835.00 

1st    $1,000     1 

2nd  $1,000    1^4 

3rd   $1,000    .  ..' 1% 

4th   $1,000    1% 

5th   $1,000    2 

6th   $1,000    2% 

7th   $1,000    3 

8th   $1,000    3-% 

9th    $1,000    4 

10th   $1,000    4% 

llth   $1,000    5 

12th    $1,000    5Mr 

13th   $1,000    6 

15th   $1,000    6 

20th   $1,000    6 

It  will  be  noted  that  the  tax  of  1%  as  to  individuals,  2%  as  to 
corporations,  commences  with  an  income  of  $1,000,  increasing  to 
6%.  Reducing  this  income  to  a  capital  value,  after  allowing  an 
exemption  of  $1,200  for  husband  and  wife  without  children,  would 
mean  that  a  person  would  have  to  receive  5%  on  $20,000  of  prop- 
erty in  order  to  pay  any  income  tax  whatsoever,  and  in  such  case 
the  tax  indeed  would  be  $10,  or  l/20th  of  1%  which  is  equivalent 
to  5c  on  $100  of  value.  It  has  been  figured  out  that  the  Wisconsin 
income  tax  does  not  reach  3%  until  the  taxable  income  or  income 
above  the  allowed  deductions  exceeds  $7,000.  A  3%  income  tax 
would  amount  to  only  1^  mills  on  the  principal  or  capital  value, 
which  is  equivalent  to  15c  on  $100  of  principal.  The  Wisconsin 
tax  reaches  3  mills  on  the  capital  value  only  when  the  taxable 
income  is  in  excess  of  $12,000. 

Next  to  a  tax  on  natural  resources  and  monopolies,  no  tax  is 
so  popular,  fair,  discriminative  and  just  as  an  income  tax.  People 
who  earn  a  profit  are  willing  to  pay  a  tax  thereon  but  those  own- 
ing non-income  bearing  property  are  usually  slackers,  objectors 
to  the  law  and  its  administration.  The  income  tax  recognizes  the 
difference  in  the  interest  rate  of  mortgages,  deposits,  and  stocks. 
It  permits  offset  of  indebtedness  and  losses.  It  may  be  drafted 
on  national  lines  thereby  reducing  the  number  of  tax  systems.  In 
such  case,  the  interpretation  as  to  the  national  income  tax  laws 
are  available  to  state  authorities,  which  is  an  exceedingly  valuable 

31 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

asset  to  tax  administrators.  It  would  save  corporations  and  in- 
dividuals from  making  both  a  federal  income  tax  return  and  a 
general  property  listing.  It  would  of  necessity  be  administered 
by  the  state  authorities,  thus  making  it  more  uniform  of  admin- 
istration. If  it  is  made  a  parent  tax,  permitting  deductions  of 
any  personal  property  tax  paid,  it  would  be  a  matter  of  indiffer- 
ence as  to  how*  the  general  property  tax  were  administered  by 
local  officials. 

It  can  be  adopted  under  our  present  constitution  which  pro- 
vides : 

''Laws  may  be  passed  providing  for  the  taxation  of 
incomes  and  such  taxation  may  either  be  uniform  or 
graduated  and  may  be  applied  to  such  incomes  as  may  be 
designated  by  law ;  but  a  part  of  each  annual  income  not 
exceeding  $3,000  may  be  exempt  from  such  taxation." 

Far  and  above  and  beyond  all  the  aforesaid  advantages,  it 
permits  of  appropriate  exemptions  to  the  needy  and  pressure  on 
the  affluent.  To  appreciate  the  necessity  herefor  it  is  necessary 
to  have  some  sense  of  proportion — to  have  some  idea  as  to  the 
present  distribution  of  national  incomes.  429,401  persons  or 
families  paid  an  income  tax  for  1916.  This  is  equivalent  to  one 
person  in  250.  The  Bankers'  Trust  Company  of  New  York  esti- 
mates that  there  are  19,402,000  families  with  incomes  under  $1,300, 
there  being  26,875,000  families  in  the  United  States.  In  other 
words,  72%  of  the  families  have  an  income  of  less  than  $1,300. 
The  Rockefeller  income  is  probably  equal  to  that  of  60,000  families 
and  is  furthermore  equivalent  to  the  surplus  or  saving  of  more 
than  600,000  families,  the  balance  of  their  wages  going  to  land, 
labor,  capital  and  taxes  as  embodied  in  the  price  of  bare  necessities. 

A  tax  of  1%  against  a  $1,000  deposit  in  bank  of  such  a  family 
is  a  tax  on  necessaries.  Not  so  a  tax  of  1%  on  deposit  of  $100,000. 
Such  a  uniform  tax  fails  to  recognize  that  in  the  one  case  a  man 
spends  his  entire  income  for  labor,  interest,  rent  and  indirect 
taxes,  while  in  the  other  it  goes  slightly  for  necessaries,  and 
largely  for  pleasure  and  service  by  the  former,  or  for  surplus. 

The  writer  is  not  in  full  accord  with  the  idea  of  both  a  cor- 
poration and  an  individual  tax.  While  the  corporation  tax  sim- 
plifies somewhat  the  administration,  it  does  not  permit  of  an 

32 


BY   JOHN   A.   ZANGERLE,   COUNTY   AUDITOR 

elasticity  of  rate,  imposed  according-  to  ability  to  pay.  "Thousands 
of  smaller  stockholders  rely  on  a  small  dividend  to  pay  the 
necessities  of  life — to  defray  the  cost  of  living.  A  few  stock- 
holders on  the  other  hand,  may  not  require  such  an  income  for 
such  purposes  and  use  it  for  surplus  or  reserve  for  reinvestment. 
A  uniform  rate  of  taxation  on  corporate  income  thus  works  an 
injustice. 

If  the  income  tax  applied  only  to  individuals  it  would  reach 
all  profits  and  income  of  corporations  and  permit  of  proper  dis- 
crimination in  rates. 


DEMOCRACY 

Uncle  Sam,  in  the  income  progressive  tax  rates  with  $2,000 
exemptions  to  married  men  has  molded  more  democracy  in  one 
year's  taxation  legislation,  than  aristocratic  and  monarchic  Europe 
ever  did  in  its  centuries  of  income  and  other  tax  experiences. 
States  with  a  uniform,  inelastic,  low  or  high  rate  tax  system  should 
mark  Uncle  Sam's  deviation  from  former  class-moulding  systems. 
This  class-moulding  uniform  system  is  democratic  in  name,  but 
plutocratic  and  aristocratic  in  results.  It  provides  for  uniformity 
of  rate  against  every  dollar  of  value  without  distinction.  It  will 
tax  the  $100  savings  account  as  it  will  the  $100,000  account — at  the 
same  rate.  But  the  dollar  of  a  man  of  family,  out  of  work,  or 
receiving  $1,000  per  annum,  is  a  different  dollar  than  the  last 
dollar  of  income  of  a  man  enjoying  $20,000  or  more  annually.  In 
the  former  case,  the  dollar  is  part  of  the  operating  expense  of  a 
man's  family  and  in  the  latter  case  it  becomes  surplus  to  be  re- 
invested. If  the  $1,000  income  man  bore  no  share  of  his  country's 
burden,  the  story  might  be  different.  But  he  does.  Every  dollar 
spent  is  impregnated  with  national,  state  and  local  taxes,  licenses, 
public  utility  charges,  private  rentals  and  pinches.  The  United 
States  government  recently  raised  freight  and  passenger  rates 
$750,000,000  which  is  paid  by  the  "man  who  pays  no  tax."  Tobacco, 
cigaretts,  liquor,  internal  revenue,  etc.,  involving  probably  about 
$600,000,000  of  revenue  last  year  were  paid  mostly  by  people  who 
"pay  no  taxes."  The  steel,  oil,  iron,  coal  and  copper  companies 
sell  over  $1,000.000,000  of  property  annually  to  other  people  who 

33 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

charge  prices  which  includes  taxes  and  rentals— these  prices  are 
paid  by  "people  who  pay  no  taxes."  Indeed,  the  largest  levy  in 
history,  past,  present  and  probably  future  of  the  world,  the  eight- 
billion  dollar  Liberty  levy  of  1918,  about  to  be  enacted,  will  pro- 
vide in  round  numbers  $2,000,000,000  revenue  from  liquor,  tobacco 
and  amusement  taxes,  to  be  paid  largely  by  "people  who  pay  no 
taxes,"  while  the  $6,000,000,000  will  be  raised  from  people  who 
could  not  earn  a  bare  living  except  by  the  use  of  the  labor  of  the 
"people  who  pay  no  tax" — who  could  not  live  in  comfort  without 
the  daily  service  of  the  "people  who  pay  no  taxes/'  and  who  will 
pay  the  $6,000,000,000  only  because  they  can  get  it  from  and 
through  "the  people  who  pay  no  tax." 


WHY  THE  INCOME  TAX 

The  Auditor  in  his  pamphlet  "Why  a  Corporate  Excess 
Tax"  expressed  the  opinion  that  40  corporations  of  this  city  have 
a  market  value  based  on  earnings,  $100,000,000  greater  than  the 
physical  and  taxable  value  of  their  property.  Indeed  nothing  is 
so  perplexing  to  the  average  taxpayer  as  the  astonishing  differ- 
ence between  the  amount  of  capitalization,  surplus  and  undivided 
profits  on  the  one  hand  and  the  assessed  value  of  the  physical 
property  of  our  wealthy  corporations  on  the  other.  The  differ- 
ence is  generally  credited  to  "good  will"  which  is  not  taxable  in 
Ohio  and  which  is  merely  the  barometer  indicating  the  over-plus 
capitalization  of  net  earnings  of  the  company,  after  allowing  a 
profit  on  the  tangible  property. 

Coal  companies  have  recently  made  from  100  to  1000%  on 
the  assessed  value  of  their  property.  The  various  oil  companies 
have  a  physical  valuation  in  the  relationship  of  one  to  five  of  their 
earning  capacity.  The  steel  companies  have  recently  earned  in 
many  cases  over  100%  of  the  assessed  value  of  their  physical 
property. 

Our  war  conditions  are  upsetting  all  former  values.  Stocks 
and  bonds  in  some  cases  earning  40  and  50%  have  slumped  mil- 
lions of  dollars  in  value — due  undoubtedly  to  the  credit  system 
being  largely  controlled  and  enlisted  in  the  universal  service  of 
winning  the  titanic  struggle  of  freedom.  Millions  of  dollars  of 
value  heretofore  taxed  as  the  property  of  certain  corporations 

34 


BY   JOHN   A.   ZANGERLE,   COUNTY   AUDITOR 

are  now  set  up  as  the  property  of  the  government  charged  only 
with  the  labor  and  interest  and  other  over-head  expenses. 
Credit,  formerly  taxable,  is  now  in  untold  millions,  enlisted  in 
government  service,  non-taxable  by  our  state  authorities.  Over 
$263,000,000  of  Liberty  Bonds  and  Treasury  certificates  have  thus 
far  been  sold  in  this  city  which  approximately  equals  the  total 
amount  of  personal  property  listed  last  year  for  taxation  excluding 
public  utilities  and  banks. 

Indeed,  it  is  becoming  increasingly  apparent  that  speculative 
retail  land  values,  especially  of  Euclid  Ave.,  Prospect  and  Su- 
perior Streets,  in  fact  all  thoroughfares  in  the  city,  more  or  less, 
will  require  re-appraisal  in  1919,  with  large  consequent  loss  and 
shrinkage  in  the  duplicate  at  a  time  when  governmental  costs  and 
labor  require  an  unusual  increase.  The  withholding  of  funds  by 
banks  and  elimination  of  non-essential  lines  of  production  and  dis- 
tribution are  dissipating  these  surplus  unproducing  speculative 
values,  even  as  the  greater  remuneration  in  war-time  industries 
attracts  the  credit  market,  thereby  in  turn  depressing  the  real 
estate  market. 

Earnings  on  the  other  hand,  are  expanding  by  leaps  and 
bounds.  30  to  50%  is  not  unusual.  Yet  under  the  law  they  are  not 
taxable  by  our  state.  Ohio  must  recognize  the  changing  conditions 
and  conform  her  taxing  method  to  the  present  abnormal  state  of 
business  affairs. 

The  Committee  on  Taxation  Study  appointed  by  the  City  of 
Pittsburgh  recently,  aided  in  its  deliberation  by  a  most  intensive 
student  of  taxation,  Prof.  J.  T.  Holsworth,  were  strong  for  the 
income  tax  as  a  panacea  for  Pittsburgh's  impoverished  con- 
dition and  recommended  the  following  features  as  desirable  for 
the  State  of  Pennsylvania  and  more  particularly  for  the  City  of 
Pittsburgh : 

1.  The  adoption  of  an  income  tax  with  the  principle  of  gradu- 
ation or  progression. 

2.  The    placing   of    the    exemption    limit    low    enough    (say 
$1,200  for  an  unmarried  man)   to  include  all   incomes  above  the 
level  of  subsistance. 

3.  The  adoption  of  the  principle  of  "information  at  source" 
rather  than  "collection  at  source"  so  far  as  feasible. 

35 


SHALL  WE  CLASSIFY  PROPERTY  FOR  TAXATION 

4.  The  inclusion  at  the  outset  of  individuals  only  and  not 
corporations.     Experience  with  the  system  as  applied  to  persons 
may  lead  later  to  its  application  to  corporations. 

5.  The   adoption   of   the   practice   of   permitting  the   person; 
paying  a  personal  property  tax  to  apply  that  payment  on  his  in- 
come tax,  until  such  time  as  the  income  tax  can  supplant  the  per- 
sonal property  tax  altogether. 

6.  The  distribution  of  the  proceeds  of  the  tax  as  follows: 
(a)    retention   by   the   state   of   a   sufficient   percentage    (possibly 
about  5  to  10  per  cent)  to  cover  the  expense  of  administering  this 
and  other  state  tax  laws :   (b)   distribution  of  the  balance  to  the 
counties  in  proportion  to  their  taxable  valuations — the  counties 
retaining,   (say)   one-third  of  such  balance,  and   distributing  the 
remainder   to    the    cities,   boroughs    and    townships    within   their 
boundaries  in  proportion  to  their  respective  taxable  valuation." 

The  foregoing  coming  from  the  pioneer  classified  property 
tax  state  is  interesting.  The  history  of  taxation  legislation  in 
the  various  states  seems  to  indicate  a  slow  but  sure  evolution  from 
the  general  property  to  the  classified  property  system,  followed 
by  the  progressively  graded  income  and  inheritance  taxes  and 
finally  by  home  rule.  Ohio,  having  practically  abandoned  the 
state  levy,  could  undoubtedly  be  induced  to  surrender  the  slight 
levy  now  inuring  to  it.  The  taxation  question  in  such  cases  will 
become  largely  a  local  question,  permitting  change  and  adaptation 
to  local  needs.  Indeed,  the  Auditor  has  of  late  allowed  local 
authorities  to  assess  their  local  property  on  the  theory  that  the 
tax  rate  inured  so  largely  to  local  bodies  and  very  little,  one-fourth, 
one-fifth  or  even  one-sixth  to  the  state  and  countv. 


INCOME  TAX  NOT  FINAL 

The  income  tax  is,  of  course,  not  final.  Nothing  is.  The 
justice  of  such  a  tax  must  not  be  permitted  to  develop  into  a 
license  to  corporations  to  charge  prices  to  the  public  ad  libitum  be- 
cause the  state  receives  a  part  of  the  profit  and  is  in  fact  a  partner. 
While,  in  other  words,  the  state  may  only  be  able  to  get  a  small 
share  of  the  profits,  arising  in  the  operation  of  our  steel,  copper, 
ore,  coal  and  oil  miles,  in  the  transportation,  telegraph,  telephone, 

36 


BY   JOHN   A.   ZANGERLE,   COUNTY   AUDITOR 

water  power  and  other  monopolies,  such  participation  should  not 
render  the  public  more  lax  in  demanding  at  the  earliest  oppor- 
tunity that  these  natural  resources  become  public  property.  They 
do  not  and  cannot  work  for  the  government  while  they  are  private. 
Their  private  ownership  impoverishes  our  people  and  besmirches 
our  democracy.  The  greater  the  people's  need  for  these  mineral 
rights  becomes,  the  greater  is  the  mortgage  the  owners  claim.  It 
is  anomalous  that  while  the  United  States  is  depleting  her  coal, 
copper,  iron  and  oil  mines  and  impoverishing  her  forests,  the 
people's  need  of  such  impoverished  and  barren  resources  cause 
them  to  become  increasingly  and  fabulously  valuable.  The  United 
States  will  not  be  organized  efficiently  for  service  to  her  people 
or  for  inter-national  trade  until  the  natural  resources,  the  props 
to  the  whole  social,  economic  and  political  structure  become 
national.  Now  is  the  time,  or  never  to  make  our  country  great, 
invincible  and  one. 


DIRECT  INHERITANCE 

Another  form  of  taxation  which  the  public  of  Ohio  will  soon 
demand,  and  which  needs  to  supplement  the  general  property  tax 
system  and  the  classified  property  tax  system,  is  that  of  taxing 
direct  inheritances.  The  Committee  on  Taxation  Study  for  the 
City  of  Pittsburgh,  recommending  this  tax,  reported  among  other 
things,  as  follows : 

"Both  students  of  taxation  and  the  general  public 
are  rapidly  reaching  the  conclusion  that  a  properly  levied 
tax  on  direct  inheritances  is  a  desirable  tax.  New  York 
first  adopted  a  direct  inheritance  tax  in  1891.  Since  that 
time,  it  has  been  adopted  by  31  other  states,  one  of  which 
has  abandoned  it,  so  that  it  is  now  in  use  in  nearly  two- 
thirds  of  the  states  of  the  Union.  Thirty-one  states  have 
a  tax  on  direct  inheritance,  20  having  a  progressive  tax 
and  only  11  a  proportional  tax.  A  proportional  rate  must 
be  a  low  rate.  Of  the  11  states  that  have  it,  8  have  \%  or 
less,  while  the  other  3  have  only  2%.  Of  the  20  states 
that  have  a  progressive  tax,  18  start  with  the  rate  of  1%, 
one  with  y2%  and  one  with  3%.  The  rate  advances  as 
high  as  15%." 

37 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

The  progressive  rate  is  perfected  by  exempting  a  certain 
amount  entirely.  The  exemption,  like  the  rate,  should  vary  with 
the  relationship  of  the  heir  to  the  deceased.  This  is  the  case  in 
thirteen  out  of  thirty-one  states  using  the  tax.  The  exemptions 
vary  from  $1,000  to  $3,000  in  Arkansas  to  from  $5,000  to  $25,000 
in  Oklahoma.  Of  the  eighteen  states  that  have  a  uniform  ex- 
emption, five  exempt  $5,000,  eight  exempt  $10,000  and  one  exempts 
$2,000,  $3,000,  $7,500,  $20,000  and  $25,000.  In  a  few  states  the 
exemption  is  held  to  apply  to  the  whole  estate  and  in  the  remainder 
to  the  individual  share. 

Under  the  constitution  amendment  adopted  in  1912,  the  Ohio 
legislature  is  empowered  to  enact  a  direct  inheritance  tax  at  pro- 
gressive rates. 


ADDENDA 
REVENUE  SYSTEMS 

States  Containing  Large  Cities 

Illinois:  This  state  is  still  operating  under  the  general  prop- 
erty tax  as  in  Ohio.  Several  years  ago  by  initiation  of  the  people, 
the  legislature  was  requested  to  submit  to  the  people  for  ratifica- 
tion a  classification  amendment  similar  to  the  one  proposed  in 
Ohio.  The  legislature  submitted,  however,  an  amendment  calling 
for  classification  only  of  "personal"  property  in  1916.  The  Sup- 
preme  Court  of  Illinois  has  before  it  the  question  as  to  whether 
it  was  legally  adopted,  it  not  having  received  a  majority  of  all 
votes  cast  at  the  election. 

Relief  is  apparently  immediately  necessary  in  Illinois.  Cook 
County  (Chicago)  secured  an  aggregate  listing  of  approximately 
$104,000,000  as  representing  all  the  taxable  money,  credits,  bonds 
and  stocks  and  other  intangible  property.  In  Cuyahoga  County 
last  year  the  same  forms  of  property  were  listed  at  approximately 
$125,000,000  although  this  county  represents  less  than  one-third 
of  the  population  of  Chicago. 

New  York:  There  is  no  limitation  on  the  taxing  power  of 
the  New  York  State  Legislature.  Since  1880  the  policy  of  the 
state  has  been  to  classify  property  and  to  impose  a  special  tax 
on  each  class. 

38 


BY   JOHN   A.   ZANGERLE,   COUNTY   AUDITOR 


This  state  now  has  a  mortgage  recording  tax  of  50c  per  $100 
of  value  payable  once  for  all.  A  secured  debt  tax  also  is  provided. 
Secured  debts  cover  mortgages  on  real  property  outside  the  state 
and  bonds  secured  thereby  and  also  debts  not  secured  by  mort- 
gage, which  includes  certain  corporation  securities  and  also  the 
public  bonds  of  other  states  and  counties  and  their  sub-divisions. 
Promissory  notes  running  for  less  than  one  year  are  excluded 
from  the  act.  The  rate  is  now  20c  per  $100  per  annum  and  may 
be  paid  for  a  five  year  period.  One-half  of  the  recording  tax 
inures  to  the  state  and  one-half  to  the  county.  All  of  the  Secured 
Debt  Tax  goes  to  the  state. 

Whatever  success  attaches  to  the  New  York  recording  and  in- 
vestment registration  tax  must  be  due,  first  to  the  simple,  inex- 
pensive administration  whereby  the  same  is  paid  originally  once 
for  all  and  not  levied  annually  as  in  some  states,  and  second,  it  is 
largely  due  to  the  penalties  provided.  On  mortgages  and  invest- 
ments unrecorded  and  unregistered,  an  additional  and  very  heavy 
inheritance  tax  is  imposed  and  the  property  becomes  subject  to  the 
general  tax  which  in  New  York  City  runs  from  $2.00  to  $2.34  per 
$100  of  assessment.  In  other  words,  the  Recording  and  Regis- 
tration tax  is  an  alternative  partial  exemption  to  a  liability  at  a 
ten  times  greater  rate. 

When  in  Ohio,  low,  flat  rates  or  a  registration  and  recording 
tax  are  adopted  with  no  obligation  or  liability  to  a  larger  and 
higher  rate  as  a  penalty,  will  it  prove  as  successful  as  in  New 
York  ?  The  New  York  feature  of  a  heavy  inheritance  tax  or  some 
similar  method  may  prove  its  salvation.  The  fact  that  these  spe- 
cific taxes  are  immunities  or  exemption  privileges  has  undoubt- 
edly much  to  do  with  their  successful  administration. 

In  1917  New  York  adopted  an  income  tax  against  corporations 
at  a  3%  rate,  using  the  United  States  income  tax  return.  This 
was  in  lieu  of  all  personal  property  and  franchise  tax.  In  view 
of  the  fact  that  the  burden  of  the  personal  property  tax  is  in- 
significant and  the  administration  perfunctory  in  New  York,  a 
greatly  increased  revenue  return  may  be  expected,  although  com- 
paratively to  the  Ohio  burden  of  corporations,  it  will  be  exceed- 
ingly light.  One-third  of  this  tax  goes  to  the  locality  and  two- 
thirds  to  the  state.  So  far  as  I  know  no  serious  attempt  is  made 
to  assess  money  in  bank.  New  York  has  no  listing  system  as 

39 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

prevails  in  Ohio.  The  assessors  mark  a  taxpayer,  so  to  speak, 
and  notify  him  of  the  assessment,  whereupon  a  substantial  re- 
duction is  generally  granted  by  sworn  representations.  There  are 
over  20,000  such  reductions  annually. 

New  York  agitated  several  measures  this  year.  Among  others 
a  limited  tax  rate  of  $1.75  was  proposed  (the  rate  in  Manhattan 
will  be  $2.36  this  year).  Shares  of  stock  in  local  corporations 
were  proposed  to  be  taxed.  The  right  of  offset  of  indebtedness 
against  property  (not  only  credits)  was  distasteful  to  many.  A 
listing  system  for  all  worth  over  $5,000  was  sought.  All  of  these 
failed,  largely  through  the  opposition  of  the  New  York  Tax  Re- 
form Association,  with  William  G.  Low  as  President  and  A.  C. 
Pleydell  as  Secretary,  incorporated  in  1891.  This  organization 
is  a  powerful  factor  in  the  shaping  of  taxation  matters  for  that 
state.  Its  platform  is  illuminating  as  showing  the  tendency  and 
direction  of  leading  thought  of  the  leading  industrial  and  com- 
mercial city  of  the  United  States: — 

"1.  The  most  direct  taxation  is  the  best,  because  it 
gives  to  the  real  payers  of  taxes  a  conscious  and  direct 
pecuniary  interest  in  honest  and  economical  government. 

2.  Mortgages  and  other  capital  engaged  in  produc- 
tion or  trades  should  be  exempt  from  taxation;  because 
taxes  on  personalty  tend  to  drive  it  away,  to  put  a  pre- 
mium on  dishonesty  and  to  discourage  industry. 

3.  Real  estate  should  bear  the  main  burden  of  taxa- 
tion; because  such  taxes  can  be  most  easily,  cheaply  and 
certainly  collected,  and  because  they  bear  least  heavily  on 
the  farmer  and  worker. 

4.  Besides  real  estate  taxes,  corporations  should  pay 
in  taxes  only  the  fair  value  of  the  franchises  they  obtain 
from  the  people. 

5.  No  legislature  will  venture  to  enact  a  good  system 
of   local   taxation  until   the   people   perceive   the   correct 
principles  of  taxation. 

THEREFORE :  We  are  uniting  our  efforts  to  keep 
up  intelligent  agitation  of  the  subject  in  order  to  improve 
the  system." 

40 


BY   JOHN   A.   ZANGERLE,   COUNTY   AUDITOR 

Pennsylvania:  Places  the  burden  of  taxation  for  state  pur- 
poses almost  wholly  on  corporations  and  insurance  companies. 
Corporations  are  taxed  by  the  state  except  on  their  real  estate 
which  is  taxed  locally.  Local  taxation  falls  principally  on  the 
real  estate  of  individuals,  also  on  horses,  cattle,  occupations, 
licenses  and  certain  corporate  real  estate  as  that  of  manufacturing 
companies,  but  not  that  of  railroads  and  other  quasi  public  cor- 
porations which  are  exempt  from  local  taxation  upon  property 
essential  to  the  exercise  of  their  franchise  privileges.  There  is 
an  extensive  system  of  business  taxes  and  licenses.  The  capital 
stock  of  manufacturing  corporations  is  exempt  from  taxation. 

In  counties  and  municipalities,  all  offices,  posts  of  profit, 
professions,  trades  and  occupations  as  well  as  single  freemen  fol- 
lowing no  calling  are  assessed  along  with  property.  Corpora- 
tions pay  a  tax  of  five  mills  on  the  actual  value  of  the  capital 
stock  excepting  capital  stock  invested  and  employed  in  manufac- 
turing. Corporations  which  do  not  pay  the  aforesaid  capital 
stock  tax  are  required  to  pay  a  tax  of  3%  on  their  net  earnings 
or  income.  A  corporate  loan  tax  of  4  mills  is  laid  on  the  nominal 
value  of  all  mortgages,  bonds,  certificates  of  indebtedness  of  all 
corporations,  public  and  private,  except  banks,  which  pay  a  4-mill 
tax.  Bank  stocks  pay  a  4-mill  tax  on  the  actual  value  of  the 
shares  but  they  may  elect  to  pay  a  tax  at  the  rate  of  10  mills  on 
the  par  value  of  their  stock. 

Not  only  is  the  system  of  securing  taxes  from  business  li- 
censes and  fees  as  against  wholesalers,  retailers,  brokers  and 
restaurants,  etc.,  extremely  heavy,  but  the  system  of  taxing  oc- 
cupations and  callings  is  very  extensive.  This  latter  might  be 
called  a  presumptive  income  tax  in  that  it  taxes  the  callings  at  a 
fixed  amount  which  may  be  said  more  or  less  to  correspond  with 
the  value  of  the  occupation  or  calling;  for  instance,  a  carpenters 
occupation  is  assessed  $400,  a  lawyer  at  $1,000,  a  stenographer 
at  $400,  a  plumber  at  $400.  The  Pittsburgh  report,  above  referred 
to,  says  of  this  tax  that  "it  is  objectionable  not  only  because  of 
its  obvious  inequality  and  impracticability,  but  also  because,  ac- 
cording to  the  statement  of  the  taxing  officials,  it  costs  more  to 
levy  and  collect  than  the  revenue  produced  from  it.  The  report 
of  the  New  York  Bureau  of  Municipal  Research,  employed  in 
1914  to  make  an  efficiency  investigation  for  the  county,  said  of 

41 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

the  occupation  tax:  "Our  examination  of  the  operation  of  the 
occupation  tax  indicates  that  the  law  requiring  it  should  be 
repealed." 

Pittsburgh  and  Philadelphia  seem  to  have  separate  systems 
of  taxation  and  Scranton  and  Pittsburgh,  among  others,  have  re- 
duced the  rate  of  taxation  against  improvements  so  that  the  same 
are  now  assessed  at  80%  of  their  value.  It  is  exceedingly  difficult 
to  understand  the  Pennsylvania  system,  in  view  of  the  fact  that 
the  state,  county  and  municipalities  use  a  different  basis,  that 
these  different  bases  are  assessed  by  different  authorities,  that 
some  of  the  collections  are  apportioned  as  between  state,  county 
and  municipality,  and  that  the  collections  are  separately  made. 

Michigan:  All  municipal,  state  and  county  bonds  are  ex- 
empt. Apparently  there  is  no  annual  franchise  tax.  Corporations 
pay  one-half  of  one  mill  on  each  dollar  of  capital  authorized 
when  starting.  All  moneys,  credits,  stocks,  bonds,  bank  stock 
and  real  estate  are  assessed  and  taxed  the  same  as  in  Ohio.  Real 
and  personal  property  are  assessed  at  true  cash  value. 

The  franchise  tax  on  railroad,  canal  and  turn-pike  companies, 
is  $'4  of  1%  annually  on  paid  in  capital  stock.  Railroad  companies 
doing  business  within  the  state  must  report  annually  to  the  State 
Auditor,  giving  a  list  of  stockholders,  bond  and  security  holders. 
State  Auditor  renders  a  bill  to  the  railroad  company  of  2%  upon 
the  par  value  of  stock  and  1%  upon  the  face  value  of  the  bonds 
and  securities.  This  tax  is  paid  by  the  railroad  and  deducted  from 
the  dividends  and  interest  to  the  respective  owners.  Taxes  are 
paid  to  the  State  Treasurer  before  June  30th,  and  if  delinquent 
bear  interest  at  2%  per  month. 

All  mortgages  on  real  estate,  located  within  the  state  pay  a 
filing  fee  to  the  County  Treasurer  before  being  presented  for 
record,  at  a  rate  of  50c  on  each  $100.  State  gets  one-half  of  these 
filing  fees  and  county  general  fund  one-half.  Mortgages  cover- 
ing real  estate  in  Michigan  and  other  states  are  only  required  to 
pay  a  filing  fee  upon  the  proportion  representing  the  Michigan 
property.  Mortgages  cannot  be  released,  assigned,  enforced  or 
received  in  evidence  until  this  filing  tax  is  paid.  Secured  debts 
pay  y-2  of  1%  on  face  value;  paid  to  the  County  Treasurer;  one- 
half  goes  to  the  state  and  one-half  to  the  county.  Any  mortgage 

42 


BY   JOHN   A.   ZANGERLE,   COUNTY   AUDITOR 

given  by  libraries,  churches,  fraternal  societies  and  building  and 
loans  are  exempt  from  the  filing  fee.  Moneys  deposited  in  banks 
are  considered  credits  but  other  moneys  are  treated  as  money. 
Foreign  life,  and  insurance  companies  other  than  life,  are  taxed 
2%  of  their  gross  premiums  and  fire  insurance  companies  3%. 
This  state  also  has  an  inheritance  tax,  all  the  income  from  which 
goes  to  the  state.  Each  motor  vehicle  pays  $3.00  annually,  the 
fees  going  to  the  state. 

Minnesota:    The  law  provides: 

"All  real  and  personal  property  in  this  state,  and  all 

personal  property  of  persons  residing  therein,  including 

the  property  of  corporations,  banks,  banking  companies, 

and  bankers,  is  taxable,  except  such  as  is  by  law  exempted 

from  taxation." 

State,  county  and  municipal  bonds  are  exempt.  All  property 
shall  be  assessed  at  its  true  and  full  value  in  money. 

In  lieu  of  all  other  taxes  the  following  property  is  classified: 
Railroad  companies  annually  pay  5%  of  gross  earnings,  earned 
within  the  state.  This  is  paid  to  the  State  Treasurer  and  is  ap- 
portioned to  the  respective  counties  according  to  the  relative  use 
of  railway  property.  State  deducts  state  portion  from  amount 
allotted  each  county  in  proportion  that  the  state  rate  bears  to  the 
total  county  rate ;  balance  is  divided  between  county  and  city  or 
township  through  which  the  line  operates.  Express  companies 
pay  8%,  freight  companies  6%,  sleeping  car  companies  5%,  tele- 
graph and  telephone  companies  3%  of  gross  earnings,  earned 
within  the  state,  which  is  divided  the  same  as  the  railroad  tax. 
Trust  companies  pay  5%  of  gross  earnings  annually  to  County 
Treasurer.  All  vessels  owned  or  registered  within  the  state  pay 
3c  per  ton  to  the  State  Treasurer  annually,  one-half  of  which 
goes  to  the  state  and  one-half  to  the  county. 

This  state  has  a  more  or  less  complicated  inheritance  tax 
which  is  paid  to  the  County  Treasurer;  10%  retained  and  the 
balance  turned  over  to  the  state  for  the  benefit  of  state  revenue. 

In  lieu  of  all  other  taxes,  all  mortgages  upon  real  estate, 
located  within  the  state,  paying  a  filing  fee  or  registration  tax  of 
15c  per  $100,  if  the  mortgages  do  not  run  for  more  than  five  years; 
if  for  more  than  five  years  the  fee  is  25c  per  $100.  This  fee  is 

43 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

payable  to  the  County  Treasurer  before  record  and  is  divided, 
l/6th  to  the  state,  l/6th  to  the  county,  2/6ths  to  the  school  dis- 
trict, and  2/6ths  to  the  village,  township  or  city  where  the  land  is 
located.  Mortgages  cannot  be  foreclosed,  cancelled,  assigned  or 
introduced  as  evidence  until  the  tax  is  paid. 

Moneys  and  credits  annually  pay  a  tax  of  3  mills  on  the  dol- 
lar; paid  to  the  County  Treasurer,  and  divided  the.  same  as  the 
mortgage  filing  fee. 

Grain  in  elevators  is  taxed  y^  of  a  mill  per  bushel  on  wheat 
and  flax  and  ^th  of  a  mill  per  bushel  on  all  other  grains  received 
in  elevator  in  a  preceding  year;  tax  is  paid  to  the  County  Treas- 
urer and  distributed  as  county  taxes. 

All  other  property  in  the  state  is  appraised  at  its  true  full 
value  in  money  and  then  assessed  for  taxation  purposes  as  fol- 
lows :  Iron  ore  mined  or  unniined  and  lands  containing  iron  ore 
at  50%  of  true  full  value.  Household  goods  and  personal  effects 
25%  ;  livestock,  merchants'  stock,  manufacturers'  material,  tools, 
implements  and  unplatted  real  estate,  33-1/3% ;  all  other  real 
estate  and  other  personal  property,  40%.  Upon  these  various 
percentages  is  then  levied  the  tax  based  upon  the  tax  rate  as  fixed 
by  the  County  Auditor. 

Motor  vehicles  pay  an  annual  fee  of  $1.50  each  which  goes 
to  the  state. 

Massachusetts:  This  state  until  of  recent  years  has  been 
under  the  general  property  tax  on  real  estate  and  tangible  per- 
sonal property.  Intangible  property  paid  a  flat  rate  until  January, 
1917,  when  an  income  tax  measure  was  put  into  force.  Interest 
on  bonds,  notes,  etc.,  and  from  certain  dividends  of  corporations, 
partnerships,  associations  and  trusts  is  taxed  at  the  rate  of  6%, 
an  exemption  of  $300  being  allowed  if  the  total  income  from  all 
sources  is  less  than  $600.  Income  from  annuities  and  excess  over 
$2,000  from  professions,  trades  or  business  are  to  pay  at  the  rate 
of  1^2%.  An  exemption  of  $500  is  permitted  for  a  husband  or 
wife  and  $250  for  each  child  or  dependent  parent,  although  the 
total  deduction  under  this  head  may  not  exceed  $1,000. 

The  law  exempts  intangible  personal  property  from  the  tra- 
ditional general  property  tax  locally  assessed  and  substitutes 
therefor  a  uniform  rate  of  6%  on  the  income  therefrom.  It  does 

44 


BY   JOHN   A.   ZANGERLE,   COUNTY   AUDITOR 


not  apply,  however,  to  intangibles  exempt  under  the  old  system 
such  as  savings  deposits,  federal  bonds  and  taxes  against  state 
and  municipal  securities.  Deduction  on  account  of  indebtedness 
is  permitted  but  only  such  proportion  of  interest  paid  out  may  be 
deducted  from  taxable  income  as  the  income  from  intangible  prop- 
erty bears  to  total  income.  Corporations,  partnerships  and  stock 
companies  must  file  with  the  tax  commissioner  the  names  and  ad- 
dresses of  -Massachusetts  share  holders  and  also  the  names  and 
addresses  of  the  Massachusetts  recipients  of  interest  on  their  bonds 
and  indebtecjness.  Mortgages  on  real  estate  are  not  taxable  upon 
their  capital  value  or  upon  their  income.  The  general  rate  of 
taxation  in  Boston  was  17.70  for  1917.  It  is  said  that  the  yield 
for  1918  will  surpass  the  1917  yield  by  $1,000,000. 

It  can  hardly  be  said  that  a  yield  from  this  limited  income  tax 
on  intangibles  is  very  great.  There  was  levied  for  the  1917  tax 
year  for  the  entire  state,  $11,638,437.00,  which  on  a  per  capita  basis 
amounts  to  about  $3.15  per  capita.  The  total  yield  from  tangible 
and  intangible  property  under  the  general  property  tax  and  income 
tax  for  the  1917  year  and  for  the  entire  state  was  $26,237,375.00  as 
against  a  yield  of  $23,328,159.00  for  the  1916  year  under  the  general 
property  tax. 

It  will  be  noted  that  the  per  capita  return  from  intangibles 
was  $3.15  per  capita  as  against  $2.00  realized  in  Cuyahoga  County. 
Again  this  is  hardly  comparable  because  mortgages  on  real  estate 
are  not  taxable  either  on  their  capital  or  their  income  and  are 
therefore  not  reflected  in  the  Massachusetts  data,  while  they  are 
included  in  Cuyahoga  County.  On  the  other  hand,  the  income  tax 
does  not  cover  intangibles  only  but  includes  income  in  excess  of 
$2,000 — $3,000  from  professions,  trades,  employment  and  business, 
which  tax  is  the  survival  of  the  Colonial  "faculty"  tax,  now  en- 
forced, but  for  years  a  theory,  yielding  but  little  revenue.  The 
present  rate  is  1.5%. 

In  a  general  way  it  may  be  said  that  while  the  tax  on  intangi- 
bles and  professions  has  yielded  something  in  excess  of  the  old 
law  (about  12%),  its  greatest  virtue  lies  in  the  fact  that  it  operated 
to  produce  a  greater  uniformity  and  a  lower  rate,  the  rate  .having 
been  reduced  to  about  one-seventh  of  the  former  tax  on  capital 
value.  The  assessment  of  intangible  property  leaped  from 
$550,000,000  to  $2,400,000,000  in  a  single  year,  the  latter  being 

45 


SHALL    WE    CLASSIFY    PROPERTY    FOR    TAXATION 

estimated  from  the  income  tax.  This  merely  shows  how  many 
tax  payers  were  burdened  formerly  at  excessive  rates,  while 
three-fourths  of  the  intangible  property  owners  entirely  escaped. 
The  yield  from  intangibles  has  remained  about  the  same, 
while  the  \T/2%  tax  on  income,  professions,  employment,  trades' 
and  business  has  increased  from  $770,288.00  assessed  in  1916,  to 
$2,577,061.56  secured  under  the  income  tax.  This  latter  sum  con- 
stitutes 20%  of  the  entire  productiveness  of  this  limited  income 
tax,  and  therefore  reduces  the  per  capita  productiveness  of  the 
tax  frcrn  intangibles  to  approximately  $2.50  instead  of  $3.20  as 
aforesaid.  Had  income  from  real  estate,  dividends  of  corpora- 
tions (all  excluded  by  the  act)  been  included,  a  very  large  increase 
would  of  course  have  resulted. 


46 


CITY  OF  PASSAIC,  NEW  JERSEY 
Office  of  Board  of  Assessors 

February  2nd,  1918. 
r.  John  A.  Zangerle, 
County   Auditor, 

Cleveland,  Ohio. 
Dear  Sir: — 

I  am  in  receipt  of  your  most  excellent  book  of  maps  showing  the  method 
of  valuing  land  and  buildings  followed  by  your  assessing  corps. 
It  is  by  far  the  best  I  have  seen,  and  I've  seen  a  good  many. 
My   colleagues   on   the   Board,   join   me   in   thanking  you   sincerely  for  the 
most  useful  present,  and  in  oar  efforts  to  adopt  new  methods  here — which  in 
view   of   little   economies   is   somewhat   difficult — the   book   will   be   very  often 
consulted  by  us.     I  am  enclosing  stamps  to  cover  postage. 

Sincerely  yours, 

JOHN  WOOD-S, 
Clerk,  Board  of  Assessors,  Passaic,  N.  J. 


THE  TOLEDO  COMMERCIAL  CLUB 
Toledo,  Ohio 

jt 

Mr.   Mayo  Fesler,   Secretary, 

Civic  League  of  Cleveland, 

Cleveland,   Ohio. 
My  Dear  Mr.  Fesler: — 

Thank  you  very  much  for  your  courtesy  in  sending  me  a  copy  of  Mr. 
Zangerle's  report,  entitled  "Untaxed  Wealth  of  Cleveland  and  Why."  This  is  a 
mighty  interesting  report.  I  wish  there  were  more  county  auditors  like  yours. 

Will  you  not  advise  me  in  the  enclosed  stamped  envelope  how  I  might 
obtain  ten  additional  copies  of  this  report,  also  how  I  might  obtain  the  report, 
entitled  "Rules  and  Principles  with  Land  and  Building  Values  Controlling  the 
1917  Community  Assessment."  I  should  be  very  glad  to  pay  for  these  if  they 
are  not  available  for  free  distribution. 

Mr.  Zangerle  is  certainly  to  be  congratulated  on  the  manner  in  which  he 
has  attempted  to  carry  out  the  Ohio  tax  laws,  which  we  all  realize  are  almost 
impossible  of  equitable  enforcement.  I  only  wish  other  counties  might  point 
to  as  good  a  record  as  he  can. 

Cordially  yours, 

GARDNER   LATTIMER, 
GL*AJ  Director,  Public  Research  Bureau. 


NEW  YORK  LIFE  INSURANCE  COMPANY 
346  and  348  Broadway 

Now   York,   February   23rd,   1918. 
John  A.  Zangerle,  Ksquire,  Auditor, 

Cleveland,  Ohio. 
Dear  Sir: — 

J  spent  the  best  part  of  Washington's  birthday  reading  with  a  great  deal 
of  interest  your  admirable  pamphlet  entitled  "Untaxed  Wealth  of  Cleveland 
and  Why."  If  more  officials  having  to  do  with  the  subject  of  taxation  had  the 
ability  and  the  courage  to  prepare  data  for  public  consumption  along  similar 
lines,  there  would  be  hope  that  we  might  soon  arrive  at  an  equitable  system 
of  taxation  for  which  this  country  suffers. 

*********!  shall  be  very  glad  to  receive  two  additional 
copies  of  your  pamphlet  "Untaxed  Wealth  of  Cleveland  and  Why,"  for  which 
I  enclose  stamps  to  cover  postage. 

Very  truly  yours, 

C.    F.   CUSHMAN, 

Manager. 


in 
an 
lit 
tr, 
th 
a  , 
ca 


RETURN  TO  the  circulation  desk  of  any 
University  of  California  Library 

or  to  the 

NORTHERN  REGIONAL  LIBRARY  FACILITY 
Bldg.  400,  Richmond  Field  Station 
University  of  California 
Richmond,  CA  94804-4698 

ALL  BOOKS  MAY  BE  RECALLED  AFTER  7  DAYS 

•  2-month  loans  may  be  renewed  by  calling 
(510)642-6753 

•  1-year  loans  may  be  recharged  by  bringing 
books  to  NRLF 

•  Renewals  and  recharges  may  be  made  4 
days  prior  to  due  date. 

DUE  AS  STAMPED  BELOW 


)5  by 


Ser- 
.  Hist 
iiitual 
he  ob- 
le-cen- 
nality, 
easure 
politi- 


retro- 
m  for- 
if  en- 
;t  ever 
le  con- 
f  man's 
rength 
way  to 
?comes 
n. 
%hts  of 
>y  have 
Father- 
ns  and 
mption 

e  utter 
leans  a 
history 

i1          MAY  1  2  2001 

la 

• 

1 

is 
tf 

th 

ai 

n 

la 

A\ 

o\ 

12,000(11/95) 

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 

compreh                                                                   75m-8,'3i    ?n  an&  Pro" 
gress  in  ow  its  dev- 

astating  burdens;  the  masses  would  feel  its  economic  pinch. 

Local  and  state  affairs  must  be  subordinated  to  our  national 
and  international  crisis.  Therefore,  before  you  read  this  pamphlet, 
do  your  duty  to  your  country  by  buying 

FOURTH  LIBERTY  LOAN  BONDS 

33  (September-October) 


Gaylord  Bros. 

Makers 
Syracuse,  N    Y. 

nrr.MN.24jm 


YC  2: 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


